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Foreign Policy

C.H. Tung: Bridging the Trust Gap

Jan 19 , 2018
  • C.H.Tung

    Chairman, China-United States Exchange Foundation

The following are remarks by C.H. Tung, chairman of the China-United States Exchange Foundation, during the gala dinner of the China General Chamber of Commerce (CGCC) in New York on Jan 17, 2018. Tung is also CGCC’s honorary chair.

Good evening, Ambassador Cui, Ambassador Zhang, Chairman Xu Chen, ladies and gentlemen

May I begin by speaking on the subject of US-China relations.

Today’s US-China relationship began in 1972 in Beijing, when President Nixon met with Chairman Mao. Since then, eight presidents of the United States, and five national leaders of China, have worked tirelessly to nurture this important relationship. Indeed, despite ups and downs over the years, the relationship has been moving forward positively.

The rapidly developing economic relationship between the two countries is particularly impressive. In 1972, our annual bilateral trade was worth less than $100 million. But by 2016, our bilateral trade in goods and services reached $649 billion, making China the US’s largest trading partner, and vice versa.

Unfortunately, there are people from both countries who feel that they are being taken advantage of in this important trade relationship. The fact is, in such a big and consequential trade relationship, grievances from both sides are bound to arise. The United States complains about the trade deficits, job losses, difficulty in accessing the Chinese market, lack of intellectual property protection, much higher import duty in China as compared with the US, etc. The Chinese businesses complain about unreasonable CFIUS excesses against Chinese investment in the US, China’s market economy status not being recognized by the US government, and US restrictions on exports of high-tech goods, and etc.

These grievances are serious and some may well be real. The question is how these grievances can be addressed so that the trade relationship and the broader economic relationship can continue to advance. To start with, rash actions by either side will only create an environment for a very serious trade war, which is not good for either country. Patient discussion and negotiation, considering each other’s difficulties, and considering the long-term prospects of the relationship, will be the only way to create a win-win situation, not only just for now, but most importantly, for the medium and long-term benefit of both countries. I believe this is entirely possible.

Indeed, the following takeaways from the 19th party congress, held last year in Beijing, may be of interest to you. President Xi articulated that the reform and opening up of the market to the outside world since 1978 has given China enormous opportunity, and also allowed Chinese people’s livelihoods to improve. Therefore, he wants to be sure that reform and opening up of the market will be expanded in the years ahead. He spoke specifically about establishing free ports, similar to Hong Kong or Singapore, on the mainland. Subsequently, senior government officials also announced further market opening measures in the banking and insurance sectors. These actions, I believe, are just the beginning of what is to come.

It is also interesting to note that, in negotiations conducted between US and Chinese officials in the area of trade, Chinese officials suggested that imposing a border tax on imports of Chinese goods entering America will only hurt the pocketbooks of American consumers. A better way to reduce the trade deficit would be for China to buy more goods from the United States if they are available. Indeed, this has resulted in an agreement that was signed off in Beijing in November, and as a result China will import close to $250 billion of goods from the United States.

Further adding to the potential of our trade relationship, is the simple fact, often overlooked, that our two economies are remarkably complementary. For example, China is short of oil and gas, which the US has in abundance. China houses close to 20% of the world’s population, but only 7% of the world’s arable land. So, as the years go by, China needs to import more and more farm products, which the US also has in abundance. Additionally, you may be interested to note that exports of goods and services from China to the US from 2006 to 2016 grew at an average annual rate of 10% per annum. According to the US International Trade Administration, this export activity supported 910,000 jobs in 2015. Indeed, with the rapid growth of the middle class, China will turn itself from being the factory of the world, to become the consumer market of the world. This job creation number in the US is set to grow rapidly. Furthermore, China also has surplus capital, which can be placed to better uses, such as infrastructure spending in the US.

Following closely on trade relationship, let us not forget the significance of growth in two way investment between US and China. Investment from China to US is particularly noteworthy. According to the National Committee on US-China Relations, at the end of 2016, the cumulative value of Chinese FDI transactions in the US since 2000 exceeded $109 billion, resulting in the creation of more than 200,000 US jobs. Today, the governments and the people of various states in the United States welcome inward foreign investment from China.

Furthermore, today, the US-China relationship is no longer purely an economic one. An extraordinary degree of people to people contacts and exchanges in all walks of life, from students to tourists to business people to professionals and academics, are further weaving together layer upon layer of strengthening ties that are bringing our two societies closer together day by day.

Today, there are 350,000 Chinese students studying in the United States. This is a vote of confidence and an expression of friendship to the United States, by the Chinese as a people, and China as a country. Indeed, economic activity by these students translated to 150,000 jobs being created in the US, according to the Association of International Educators.

Tourism from China to the US is also rapidly increasing. In 2016, 3 million tourists from China visited the United States. And it is estimated by the White House that, in five years, 7.3 million Chinese travelers are expected to visit the US because of the availability of 10-year visas. It is estimated that this will support up to 440,000 jobs in the United States. We wish that visitations from the US to China can be more, but it is encouraging to observe the desire of Americans to learn Mandarin, and, indeed, the number of visitors are increasing, especially among the younger people. Each day, a flight from somewhere in China takes off for the United States every 11 minutes, and vice-versa. The trend for better and closer relations is difficult for anyone to stop.

While it is clear that the above economic activity is growing and is creating millions of jobs in the United States, people to people exchanges are growing the relationship in both magnitude and complexity. The stakeholders are becoming more and more diverse and multifaceted, not just the political elites in Beijing or Washington, but people across the spectrum of society in both the United States and China. It looks like this relationship has only one way to go, and that is forward.

From the above, I hope you will agree that, at this juncture of US-China relations, nurturing the trade relationship carefully and promoting people to people relationships actively is very important.

To me, as someone who has dedicated much of my life to enhancing US-China relations, the above is all great news. But I am disheartened to read in scholarly journals and to hear from some friends in the United States, that some Americans feel betrayed. They feel that, after four decades of generally positive and supportive relations between the two countries, including US support for China to enter the WTO, that China has not become like America, as they expected. Instead, China appears like more of a competitor, a rival if you will, economically; and that strategically, China’s aggressive moves in the South China Sea and other areas make it a potential rival or even adversary.

These are serious grievances, which need looking into, and need a response. In that regard, please note the following: from the beginning, China never stated that it would adopt an American-style political system. The fact is, during Dr. Sun Yat Sen’s revolution over 100 years ago, China tried to learn Western-style democracy, from the Japanese, Germans and from the United States. But those efforts were unsuccessful, and indeed brought about serious division and enormous chaos within the country. It was not until 1949, when the People’s Republic of China was established, that the country was eventually united. At that time, China was an impoverished country, with very few natural resources, no infrastructure, no public education or health services to speak of. By then, China recognized that the best way to move forward was to pursue Marxism with Chinese characteristics. Indeed, under this political doctrine, despite some ups and downs, China’s success since 1949 is for everyone to see, particularly since reform and opening up began in 1978.

Going forward, China’s mission is clear. During the 19th party congress, Mr. Xi said “We should meet the people’s ever-growing needs for a better life. This better life is not only in their material and cultural needs, but also their demands for democracy, rule of law, fairness and justice, security, and a better environment.” At the conclusion of his 19th party congress speech, he further goes on to say, “In the middle of the 21st century, we will develop China into a great modern socialist country that is prosperous, strong, democratic, culturally advanced, harmonious, and beautiful. Common prosperity for everyone in China is basically achieved. The Chinese people enjoy happier, safer, and healthier lives. The Chinese nation will become a proud and active member of the community of nations of the world.”

Additionally, notwithstanding China’s determination to forge her own path of development, China has still been a responsible global actor on the world stage. No country has done more domestically in recent years to take measures to mitigate the effects of climate change. No country has contributed more troops to UN peacekeeping efforts in recent years. Also, China’s economic activity has contributed between 30-50% of global economic growth in the last few years.

But I am obviously very concerned that the US-China relations may become adversarial in nature in the future. China’s strategic intent has all along been to promote peace and shared prosperity with its neighbors and with the world at large. China believes this is the only way to make the world a better place. At this moment, China certainly does not see America as an adversary. China has no military alliance, and her military buildup is to act purely as a deterrent, a means of self-defense. China has vowed never to use nuclear weapons to strike first. The country has no interest in exporting political ideology, nor does she have any interest in expanding her borders. Rather, China wishes to build a world where we can share our prosperity, and thereby create a universe of shared destiny.

But I am also increasingly concerned that some people in China are taking the view that the United States does not wish China well. The utterances and actions taken by the United States over the last few years, such as the pivot to China, by moving US military deployment from the Middle East into the Pacific Ocean, as well as the build-up of military alliances in the Pacific, has created the impression among the Chinese that America wants to contain China. There is a knowledge gap between US and China. There is a trust gap between US and China. People of the two countries need to redouble our efforts in order the gaps can be bridged and in doing so the US-China relationship can continue to march forward positively.

Just take a look at what we have done together in recent history:

1. In the severe financial crisis of 2008, the United States invested $800 billion to stimulate and stabilize the market in the United States and around the world. Other nations were asked to put up whatever they could manage. You may be interested to know that China eventually spent $600 billion for this effort. These efforts eventually turned the tide, and we are benefiting from it today.

2. In the face of climate change, President Obama and President Xi Jinping came together and eventually led the Paris Climate Conference to success, which very few people thought was possible.

3. In the Ebola crisis in West Africa, the United States and China pooled resources together, and within 6 months, the epidemic was contained.

These collaborative efforts are great examples. But the world is faced with pressing challenges in other areas, including nuclear proliferation generally, and specifically on the North Korean peninsula. There are challenges posed by cybersecurity. There is a need to complete the work of the Paris Climate Change Agreement. We need to manage overfishing, acidification and the cleaning-up of our oceans. There are other challenges, such as local conflicts globally, the threat of terrorism, massive migration, and etc., which are all very disruptive. In all these areas, it is essential that the US and China, together with other countries, work together. We cannot afford to be adversarial. Let us all come together and get on with the work that we should be doing.

Thank you.

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