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We Really Do Not Know How to Deal with China; and the Debt Crisis does Not Help

Ambassador Chas. Freeman, a good friend, old colleague, and one of the foremost experts on China today in the United States, has written and lectured repeatedly on the depth of our ignorance about China. China, he notes, is our only peer competitor on the planet, but we have no idea how to deal with it. Unfortunately, the Chinese may have the same ignorance dealing with us.

In the year preceding the pandemic I had the privilege of participating in a project with Peking University, China’s Harvard. I had never been to China, and, when asked, I told my hosts that I wanted to learn about their country. My hosts responded by scheduling hours’ long tours of museums, Buddhist temples, the Forbidden City, and the Great Wall. I learned that recorded Chinese and Greek history both began about the same time, about 4,000 BC. Geography, I believe, sent the two civilizations into radically different paths. Greeks turned outwards, embraced and dominated the seas, established colonies, and invaded foreign countries. Ancient Greek history begins with the sacking of Troy and ends with Alexander’s conquests. By contrast, the Chinese focused inwards and eschewed foreign adventures. China, throughout its history, has tried to consolidate the land of the Chinese people but shown almost zero interest in ruling non-Chinese – for whom Chinese demonstrate no little disdain. They fought many civil wars or defended themselves against foreign invaders. History records only two Chinese overseas adventures; they sent two fleets to conquer Japan in the 13th century. Fortuitous typhoons destroyed both fleets and China’s appetite for foreign conquests. China briefly embraced peaceful maritime expansion in the 15th and 16th centuries. China created the largest and most technologically advanced fleet the world had ever known and sent it to visit virtually every trading port in Asia. Instead of building on this success, China’s emperor ordered the destruction of the fleet and all records of its journeys. Instead, the Chinese reverted to their traditional embrace of economic production and exports; a policy that made China richer and more powerful than foreign conquests. Between 1400 and 1700, China produced about a fourth of world GDP; the United States, by comparison, has never gotten much above a fifth of world GDP except, briefly, after World War II wrecked our competitors in Europe and Asia.

Skeptical readers will point to China’s enormous program of military modernization; its fleet now has more ships than the U.S. Navy, for example. Surely, the Chinese are bent on world conquest; they have even established a naval base in Djibouti!

Take a deep breath; China’s defense budget is a fraction of the U.S. budget and its Navy can, at best, defend the seas near China’s coasts. Add in the defense budgets and fleets of our scores of allies worldwide and China’s relative military power shrinks even further.

China has always preferred economic power to military expansion; restoring its 16th century dominance of world exports would do more to give the Chinese the respect, influence, and power they seek. Even a successful Chinese invasion of Taiwan, literally the only likely flashpoint that might provoke a Sino-American war, risks catastrophic economic consequences. China’s wealth depends on the sea lanes. Two thirds of its gas, and three quarters of its oil come by tanker. Four fifths of its exports go to its customers by container ship. A tiny fraction of the U.S. Navy, especially if supported by our maritime allies, can shut down these sea lanes far beyond the protective umbrella of the Chinese navy. (I do not recommend we try this in peacetime; it would also wreak havoc on the American economy.)

Dealing with China’s economic growth is another issue; and we seem to be doing it all wrong. Trying to derail Chinese economic growth by denying it access to the latest technology reflects America’s ongoing conviction that foreigners will never be as smart as us. The Chinese are very smart and will find ways to work around our restrictions sooner rather than later. More than half the world’s economy will continue to trade with China. Even our closest allies, Europe and Japan, will not break economic ties with China, especially as we seem determined to cut them off from our markets as well.

The key to dealing with China lies in accelerating the growth of our own economy AND the economies of our allies. The post-World War II liberal economic order has contributed more than any other factor to making America so rich and powerful. Not only do we produce a fifth of the world’s GDP, we enjoy the enormous power that globalization confers on the United States by making the dollar the world’s reserve currency. But, beginning with Trump, we have turned our back on our allies, imposing tariffs on their exports and subsidizing domestic industry even when it will raise domestic costs. We have doubled down on exploiting the dollar’s power to punish a dizzying array of countries, businesses, and individuals – foes and friends alike. Unfortunately, the Biden administration continues Trump’s misguided policies. The EU, and many other countries have begun to grapple with our new isolationist policies. They will find ways to protect their own producers. They will, inevitably, trade more with other countries and less with the United States, making us poorer.

To make matters worse, we are now engaged in a childish act of self-immolation: the debt crisis. Even if resolved by the time this article appears, it will undermine faith in the U.S. economy and accelerate efforts to avoid using dollars for international transactions. If we do not reconsider our lurch towards isolating our economy and alienating our allies, we will surely find ourselves playing second fiddle to Beijing.


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