This year is special, for the world as well as China and the US. This year marks the 10th anniversary of the international financial crisis. It is also the 40th anniversary of the establishment of China-US diplomatic relations and China`s Reform and Opening-up. Hence, it is necessary to reassess the change in US power in the past 10 years and the historical experiences of the development of China-US relations in the last four decades. I have five points to make.
First, China has been rising in the past 10 years while the US has not declined. In 2017, China`s GDP reached nearly $13 trillion, rising 6.9% over the previous year. Simultaneously, the GDP of the US was $19 trillion. The total amount of the two countries` GDP reached nearly 40% of world output. China`s economic share rose from 7.3% in 2008 to 15% last year, while that of the US has stabilized between 23% to 25% in the past 10 years, plunging in 2011 but recovering to 25% this year. Therefore, China`s rise does not challenge US dominance of the world economy. Instead, there is still a big gap between China and US economic aggregates.
What`s more, China has contributed around 30% of global economic growth, which means that 5% of US economic growth came from China`s growth. It does not include those non-economic factors such as China`s long-term holding of US government bonds and supporting Washington in the international ruling system. Thus, China should appreciate US for the success of its 40-year reform and opening up, which was in synch with the establishment of China-US diplomatic relations, while the US should appreciate China for supporting its economic recovery.
Second, American society is mistaken in making China the scapegoat for its own problems. In the last two years, I visited the US about 10 times, and travelled to 10 states. After talking with hundreds of American friends, looking at US media coverage and reading research reports published by US think tanks, I feel the US is excessively anxious about China`s rise. Washington is always thinking China will replace, even defeat the US and then lead the world. Obviously this is wrong. There is no country that could defeat the US, except the US itself.
China-US competition is a marathon, not a boxing match. As a marathon runner, I understand that the key to winning is keeping all parts of the body in the best condition and to avoid making mistakes. In the past 40 years, especially after the end of the Cold War, China is the country which made the least mistakes. China has been constantly promoting domestic reforms to meet people`s needs, instead of fighting wars. Up till now, China has done well in this marathon.
The US has also done a good job. US technology has been leading globally and American culture has spread across the world. However, the US made several mistakes. It started the Iraq War and triggered the international financial crisis. US soft power has declined. Instead of becoming the beacon of freedom and democracy, the US has become synonymous with selfishness and overbearing power. According to surveys by Pew Research Center, for the first time China`s global image is better than the US`. It is something the US should think about.
Third, the US overestimated China`s global strategy. China never says that it is the global leader. China supports the international system established after World War II, and could never be the revolutionary power to overthrow it.
The industrial architecture of China and the US is complementary. They should strengthen cooperation to provide new dynamics to the economic development of both sides. China has already become a middle-income country. According to the data from The Washington Post in January 2018, China`s commodity consumption will reach $5.8 trillion this year. In three years, China may surpass the US, becoming the country with the largest consumption. Currently, consumption that contributed 58.8% of GDP is the most important impetus to China`s economic growth, which will provide a big opportunity for US businesses. In November 2018, China will host the first Import Expo in Shanghai, purchasing commodities from all over the world. The US should take this opportunity and go to China to offer the best goods.
China has three main tasks: preventing a financial crisis, reducing poverty and preserving the environment. All these tasks can be an opportunity for the US in terms of experience sharing, clean energy, and technology exports.
Fourth, the trade imbalance between China and the US has been exaggerated. Based on the statistics from BEA, in 2015, the gross revenue of American companies in China was $372 billion, out of which $232 billion came from US firms` subsidiaries in China and $150 billion directly from US exports to the country. Meanwhile, Chinese companies` gross revenue in the US (including goods and services) was $402 billion, out of which $10 billion were from Chinese firms` subsidiaries in the US and $393 billion directly from China`s exports to US. From this perspective, the US trade deficit with China was only $30 billion.
In 2015, the total value of global trade in service was $9.4 trillion. The US accounted for $1.2 trillion while China only accounted for $600 billion. The US is still the largest exporter of services, accounting for 15% of the global share. It is followed by the UK (6.9 %), Germany (5.6%), and France (4.9%). China only accounts for 4.3%, ranking fifth. In addition, China is the second largest importer of services. China`s service deficit with the US is around $140 billion.
Lessons from history
Reviewing the history in the past 40 years, we could conclude that bilateral relations are far more complicated than they were between the US and the USSR. While US-USSR relations focused on competition and conflict, China and the US are highly interdependent. I agree with Dr Henry Kissinger when he said that China and the US need to co-evolve to face global challenges jointly rather than fighting a boxing match.
My final point is that China-US relations will take a path that is different from the past and is hard to predict. In the future, countries will be severely challenged by new technologies, and non-state factors will play more important roles. China will not be the main threat to the US. No one country will be a threat to the US. Instead, the main threats will be non-state powers such as transnational companies, the internet, artificial intelligence, terrorism, and its various domestic problems. One who can deal with all these complicated problems will be the leader of the future.
Excerpted and lightly edited from the author’s speech at a symposium organized by the US Center for Strategic and International Studies