The 2016 G-20 summit will be held on September 4-5 in the Chinese city of Hangzhou. As the host, China stands ready to work with other members under the theme of building an “Innovative, Invigorated, Interconnected and Inclusive World Economy” to hold open discussions over several key priorities to provide indications for future international collaborations.
On the sideline of the summit, Chinese President Xi Jinping and U.S. President Obama will have separate meetings, which will be their eighth since 2013. And this will be Obama’s last visit to China as president. So it is likely that there will be a lot of attention on what impact their meeting will have on the China-U.S. relationship. Coincidentally, Hangzhou is also where the concluding part of the negotiations for the China-U.S. Shanghai Communiqué took place 44 years ago, in 1972.
Can China and the U.S. work together, through their differences to ensure the G-20 Hangzhou summit is a success? As China and the U.S. play critical roles in the transformation of global governance, agreement between the two countries in the following three aspects is worth watching.
1. Can China and the U.S. send clear signals that they will help world economic growth?
The establishment of the G-20 mechanism itself can to some extent be credited to the joint political will of China and the U.S., as they closely cooperated at its founding. And the two countries continue to contribute to its advance. Emerging economies, and China in particular, have been active parties in the institutional effort to respond to the world financial chaos spreading from the U.S. and Europe after 2008.
As the Chinese ambassador to the U.K. when the second G-20 summit was held in London during 2009, I remember the G-20 leaders managed to pull together a $1.1 trillion package to rescue international finance, credit and employment to bolster the overall economy. This was the first time China, as a developing country, participated in international financial aid and pledged to buy $50 billion in International Monetary Fund bonds. This significant step brought China onto the world stage as it became involved in stabilizing global finance.
The world’s economic recovery has not yet stabilized, and emerging markets have also come across serious challenges. Differences emerged among countries on how to boost growth. Some think that those who can take measures to stimulate aggregate demand should do so. Others emphasized fiscal discipline and supply side reform as the way forward. The Western developed countries are also pursuing different monetary policies. New developments call for new consensus, and the major economies meeting in Hangzhou are expected to find consensus on how to use fiscal and monetary policies, as well as structural reforms, to promote “strong, sustained and balanced growth.”
Understanding between the U.S. and China, which are the two largest economies in the world, will be at the forefront in setting the tone for the multilateral consensus needed to rebalance the global economy.
During the eighth China-U.S. Strategic and Economic Dialogue held in Beijing in June 2016, the two sides acknowledged the importance of structural reform to the sustained economic growth of the two countries as well as the world at large. China pledged to further its supply-side structural reforms while expanding domestic demand. And the U.S. committed itself to taking full account of the spillover effect on the international financial markets and to improving policy transparency and predictability when normalizing its monetary policy.
2.Will China and the U.S. be able to signal that they will lead efforts to reform global governance?
One of the highlights in China-U.S. relations in recent years is that the two countries have rapidly extended their cooperation to the global level. For example, China and the U.S. took the lead by agreeing on emission reduction programs, which paved the way for the success of the Paris Conference on Climate Change in 2015. China and the U.S. also jointly set up the Center of Nuclear Security Excellence in Beijing, setting a model for global nuclear security cooperation. The two countries are also working in the area of pandemic prevention by improving local public health systems in African countries such as Sierra Leone.
China and the U.S. have achieved visible results in counter-terrorism, non-proliferation, anti-piracy and drug control. They also engage in cooperation on hot spot issues that affect international security such as the nuclear programs of Iran and the Korean Peninsula, as well as on Afghanistan and Sudan. Even on cybersecurity, where they have disagreement, the two sides have managed to establish a hotline and agreed on the guidelines to jointly fighting against cybercrimes.
But China’s growing role on the world stage has also raised some concerns in the U.S. For example, at the G-20 summit in 2010, the IMF agreed to reform its quota and governance to reflect the increasing importance of emerging market economies. But the U.S. Congress did not approve the changes until the end of 2015. In October 2015, the IMF officially agreed to include China’s currency, the renminbi, into its benchmark Special Drawing Right currency basket.
As China rose to the second largest world economy, the country has grown in its awareness and responsibilities to do more in the world. Its initiatives are mainly in the economic arena, where most of its success comes from. For example, China put forward the “Belt and Road” initiative, which is about developing a vast new economic belt, stretching towards Europe and facilitating maritime cooperation to the East. This represents a new form of international economic cooperation for the 21st century. To support this idea, China has also promoted mechanisms such as the Asian Infrastructure Investment Bank (AIIB), which should improve global financing and governance.
The U.S., however, became uneasy and saw these initiatives as a big challenge to the dollar-led global financial system. The U.S. administration viewed them with suspicion and objection and even tried to dissuade its allies. Nonetheless, as the Chinese efforts start to show positive effects, U.S. think tanks quickly moved to adjust their views and criticized the shortsightedness of the U.S. administration. It is possible that the U.S. may join these efforts in the future.
During President Xi’s visit to the U.S. in September 2015, the two countries agreed to ensure an inclusive, resilient and constantly improving international economic architecture to meet challenges now and in the future; China and the U.S. are committed to strengthening their cooperation in the IMF and to continuing to improve the IMF’s quota and governance structure. They agreed that:
for new and future institutions to be significant contributors to the international financial architecture, these institutions, like the existing international financial institutions, are to be properly structured and operated in line with the principles of professionalism, transparency, efficiency, and effectiveness, and with the existing high environmental and governance standards, recognizing that these standards continuously evolve and improve.
At the G-20 Hangzhou summit, the international financial architecture, particularly the reform and development of the international monetary system, will be important subjects to be reviewed by the leaders. It is expected that the summit will achieve important outcomes regarding how to build more resilient national financial architecture, open and prudent financial systems, macro-prudential policy tools and frameworks, and inclusive finance. Information coming from China and the U.S. shows that the two sides are already engaged in thorough consultations.
China and the U.S. need to go beyond their differences and nurture the habit for cooperation, as they are increasingly aware that although they cannot solve all global problems, without their collaboration, none will be successfully solved.
3. Can China and the U.S. send the signal that they are willing to manage strategic differences and avoid security conflicts?
In the eighth year of Obama’s presidency, there have been ups and downs in China-U.S. relations. Yet with joint efforts, the two countries managed to keep the relationship constructive through coordination and collaboration. The past years have seen economic ties quickly expanding and people-to-people contact increasing. Even the two militaries have improved their regular dialogues and agreed upon a code of conduct for close encounters at sea or in the air. Moreover, working with China in addressing global challenges will be an important foreign policy legacy of the Obama administration.
There are also “negative assets.” The most remembered would be the Asia Pacific rebalancing strategy, which has only deepened mistrust between China and the U.S. It is noted in China that the American military has continuously reinforced deployment in the West Pacific and reemphasized the exclusive military alignment system. Against this background, the U.S. has started to take sides in the South China Sea disputes and has decided to deploy an anti-missile system in South Korea. The U.S. is also perceived to be condoning Japan’s move toward “military normalization,” which is aimed at moving away from post-WWII rules. All these signals are strategically important and will influence the perception and judgment of the U.S. — especially while many in China have growing doubts about America’s intentions.
In the past four years, President Xi and President Obama have held long and intensive meetings, on many occasions focusing on building the new model of major-country relations between China and the U.S. and on overcoming resistance and cultivating cooperation. Although the U.S. remains apprehensive about China’s initiatives, the two sides are not far apart in their belief that China and the U.S. should not move to confrontation or conflict and that they should pursue win-win cooperation.
As the U.S. presidential election is approaching, China-U.S. relations will move into a new political cycle. Consequently, the top-level strategic dialogue is all the more important, and it is hoped that the China-U.S. presidential meeting in Hangzhou will offer guidance to ensure the two countries can better manage their differences, thus paving the way for the next stage of our fruitful bilateral relationship.
Whether the South China Sea can be peaceful again is, to a large extent, dependent on what postures China and the U.S. take and how they interact with each other. Specifically, when China’s sovereign rights and maritime interests are deemed to come up against what the U.S. calls as its “top national interests,” such as ensuring freedom of navigation, it is vital that the two countries have an accurate reading of the situation. The U.S. lacks experience in dealing with powers that are “neither ally nor foe,” while China has never interacted with the world’s super power from a major country position. Both sides are still exploring, and what they say and do will shape each other’s opinion and behaviors. They both need to remain humble, keep learning and avoid simply resorting to old beliefs and behaviors.
The South China Sea is too vast to be controlled exclusively by any country. Any attempt to build an absolutely exclusive sphere of influence will only lead to geostrategic confrontation and even military conflict. China and the U.S. should seek to have meaningful dialogue, based on understanding to ensure the maintenance of peace, security and unimpeded access to maritime passages in the South China Sea.
The “Thucydides Trap” Complex
About 2,400 years ago, the Athenian historian Thucydides wrote the great book “History of the Peloponnesian War,” offering a powerful account of the rise of Athens and how “the fear that this inspired in Sparta” made war between a rising power and an established power inevitable. In 1980, American writer Herman Wouk first used the concept of the “Thucydides Trap” to warn about potential conflict between the U.S. and the former Soviet Union. In 2012, Harvard Professor Graham Allison conducted quantitative analysis of this historical metaphor and drew an analogy between the “Thucydides Trap” and the structural difficulties in the China-U.S. relationship.
Last December, I had the opportunity to discuss this with Professor Allison when we were attending a forum in Singapore. I suggested that should China and the U.S. become enemies, the future of the whole world would be altered. He fully agreed and expressed concern over the possibility of war between China and the U.S. triggered by Taiwan or the South China Sea issue, which, if either becomes true, would be a textbook case of how a rising power and a ruling power fall into the “Thucydides trap.” During this forum, Professor Allison said in his speech that for the U.S., the preeminent geostrategic challenge of this era is not violent Islamic extremists or a resurgent Russia — it is the impact of China’s ascendance, and it is an underestimation of the inherent risk in China-U.S. relations that has increased the possibility of war.
I offered different views in my comments. I said that economic globalization, the development of international institutions, interdependence among states and nuclear deterrents all point to the fact that today’s world is totally different from those of WWI, WWII and the Cold War, and it is even a further cry from the isolated small world in ancient Greece, where Athens and Sparta fought over the Aegean. The “Thucydides trap” cannot be simply transplanted from then to now. What we should consider now is how, from the heights of our modern civilization, we can use our knowledge to more wisely address the complex factors that may trigger tension, competition and conflicts between major powers.
President Xi Jinping, when speaking during his U.S. visit in Seattle on September 22, 2015, said: “There is no such thing as the so-called Thucydides Trap in the world. But should major countries time and again make the mistakes of strategic miscalculation, they might create such traps for themselves.” In their meeting in Washington later, President Obama was reportedly to have responded to Xi’s remarks that he didn’t believe in the “Thucydides trap” where conflicts were inevitable between existing and emerging powers, and that major countries, the U.S. and China in particular, should avoid conflicts. He also said he was confident that the U.S. and China have the ability to manage their differences.
China is a growing power with a population four times that of the U.S. The U.S. is a super power which claims to “continue to lead the world for a century to come,” and its difficulties with China appear to be complicated and multifaceted. For example, during the American presidential election, every candidate tries to blame China for America’s economic problems and play up conflicts of interest. But in the real world, difficulties in this area are not impossible to manage given the two countries’ deeply integrated interests.
The political differences are harder to resolve because of America’s rejection of China’s political system. But as China has become too strong to be undermined by outside powers, the two sides should be smart enough not to challenge each other on this front. The current main concern lies with the rising trust deficit in the field of strategic security, which may lead to misjudgment on both sides and increase the possibility of confrontation and conflict. The two sides need to face the issues candidly and work to build mechanisms to prevent escalation.
A persistent concern troubling the U.S. is that China is attempting to replace it as leader of the world order. But the question is: do China and the U.S. have the same understanding about what the world/international order is? It’s important that we tease out what exactly our differences are and how to disentangle them. What the U.S. strives to preserve is a “U.S.-led world order,” which rests upon American values, its global military alignment structure and the international institutions centering around the UN.
But China is excluded from this order in at least two aspects: first, China is rejected politically for having a different political system; second, the U.S.-led exclusive collective defense arrangements do not cover China’s security interests. It also stands in contrast to China’s common and cooperative security concept. What China identifies with is the international order underpinned by the purposes and principles of the UN Charter. China was among the first countries to put its signature on the UN Charter and has been one of its beneficiaries and contributors.
Nonetheless, China and the U.S. do not necessarily have completely opposing views on “order” of course. They largely agree with each other on the world’s general need for peace and development, as well as the importance of multilateral institutions with the UN at its core. Should China and the U.S. wish to avoid sliding into the historical trap of a head-on clash between powers, we will need to create a new concept of “order” that is all inclusive and can accommodate the interests and concerns of all countries, providing a common roof for all.
The world has been witnessing sweeping economic globalization, which is creating diversified interests and structural changes. This new phenomenon also calls for China and the U.S. to lead with reforms where they have more agreement, for example, in the economic and financial areas. The two countries should be able to take the lead to mobilize international coordination and collaboration to improve global governance and keep pace with the trend of globalization. The post-Cold War economic globalization is characterized by the free flow of capital, technology and market factors from the traditional Western center to the periphery.
The U.S. and the West promoted and facilitated the rapid expansion of globalization, from which the emerging countries not only gained but also in return contributed with their own growth. As a result, globalization greatly boosted the expansion of human wealth, benefiting both developed and developing countries alike. But the flaws of globalization have also been increasingly felt and criticized widely for causing inequality, widening gaps and insufficient oversight in the financial systems, thus, fueling the rise of protectionism and populism.
We can regard this as the initial stage of globalization or “globalization 1.0” in its modern sense, which is not yet well regulated. There are already some developments going against the trend of globalization and regional integration. For example, the weakening of East Asian integration due to friction among nations; the U.S.-led TPP (Trans-Pacific Partnership) is viewed with concerns about its lack of inclusiveness; “Brexit” has also presented new challenges for the European Union. Obviously, globalization can’t be reversed and the world can’t retrogress, but its flaws must be addressed. To upgrade to “globalization 2.0” requires the concerted efforts of all countries and in particular, for China and the U.S.to take the leadership in pursuit of win-win instead of win-lose end. This is also in line with the idea of building a “community of mankind.”
For the Chinese, it is even more imperative that we make ourselves better understood by the rest of the world. China has grown into the world’s second biggest economy from a poverty-stricken country in only a little over 30 years. Compared with the developed countries, China’s modernization has been realized in a compressed manner. However, it is not as simple to compress progress in thinking and in renewing our discourse. We must improve our ideas and ways of thinking more quickly and form a broader international vision, with more effective modes of expression and behavior.
In this way, the rest of the world will be able to better appreciate our culture and the reasons why we talk and act the way we do. This will also help them to understand China’s foreign policy goals as we move into this new era with China as a major country in the world.