P EIG
CARNEGIE
O N
he N L ICY
for t
ext Pres
iden
E N D O W M E N T F O R I N T E R N AT I O N A L P E A C E
t
january 2009
S u m mary
n China policy should be crafted with an understanding of what motivates the Chinese Communist Party’s actions and
reactions.
n China expects the United States to lead during the financial crisis and sees its own role as limited to its domestic affairs.
n The United States would have more success in its political and economic agenda with Beijing if it developed high-level
relationships with Chinese leaders and avoided aggressive public language on hot-button issues.
n The United States should pursue multilateral policies that include China as a responsible stakeholder, especially in
regional initiatives.
n Developing a positive image with Chinese leaders and the public will give the United States valuable political capital in
U.S.–China relations.
After the election of Barack Obama as presi- the inauguration of the Strategic Economic
dent, Carnegie’s Beijing Office assembled Dialogue between top officials. The second
a group of leading scholars of international is economic competition over issues such as
relations to discuss their expectations of the trade imbalances and competition for regional
new administration. This policy brief con- influence. Though the neoconservative suspi-
veys their opinions on various aspects of cion and ideological rhetoric of the early Bush
Sino–American relations and on U.S. foreign administration have gradually been replaced
policy in general. by pragmatic engagement, which acknowl-
Among President George W. Bush’s foreign edges the necessity of a stable U.S.–China re-
policy legacies, the United States’ relation- lationship, there is still a great deal of mutual
ship with the People’s Republic of China is misunderstanding between the two countries.
one rare bright spot. The last eight years of
U.S.–China relations have been defined by Reality vs. Perception
two themes. The first is unprecedented bilat- A common misperception among some U.S.
eral cooperation on shared concerns, such as policy makers and the American media is that
the denuclearization of North Korea, terror- China’s Communist Party (CCP) acts as a
ism, and the global financial crisis, as well as monolithic, omnipresent body. Perhaps this
2 POLICY BRIEF
view was once accurate, but it no longer fits the Official Chinese media have reiterated
reality on the ground. With rapid economic China’s limited capacity to help during the
development and an increase in wealth, people crisis internationally and domestically. While
in China have not only become more interested President Hu Jintao has worked to bolster
in politics but they also have more access to confidence in China’s ability to weather the
information. In just two years, between 2006 storm, Premier Wen Jiabao has tried hard to
and 2008, China’s Internet population soared lower domestic expectations. He has pub-
from 111 million to 253 million. Newspapers, licly cautioned that the crisis is “worse than
magazines, and radio and TV stations now expected” in China. With exports accounting
regularly run international news and editori- for close to 40 percent of China’s gross do-
als to compete for readership. The increasing mestic product (GDP), the full impact of the
Tianjian Shi heads the
public awareness of international affairs and crisis on the Chinese economy is already vis-
Carnegie Endowment’s pres-
ence in Beijing and is a special-
the Chinese media’s expanded coverage of ible and severe. China’s growth rate has plum-
ist in Asian security issues and global events have created new challenges for meted due to weakening demands for Chinese
political participation. the CCP, which must accommodate not only goods in the United States and Europe. Tens
He was associate professor, and
vested interests, such as government bureau- of thousands of manufacturing factories have
before that assistant professor, cracies and business, but also popular opinion. been closed and hundreds of thousands of
in Duke University’s Depart- How public opinion is likely to affect govern- migrant workers have been laid off in the
ment of Political Science from ment policy is an important new factor to con- coastal areas. Chinese economists agree that
1993 to 2008. He was also assis- sider when formulating policy toward China. at least 8 percent growth is needed to accom-
tant professor in the Depart-
Beijing’s priorities and its political motives modate new laborers entering the work force.
ment of Political Science at the
University of Iowa from 1992
are complex. Building a constructive relation- Industrial growth for October was 8.2 per-
to 1993, a lecturer in Peking ship will require that the United States ap- cent, the lowest in seven years. The Chinese
University’s Department of proach China not only as a global power ca- government projected GDP growth for 2009
International Politics from 1988 pable of defending its territorial integrity and at 7.5 percent, but many economists predict
to 1989, and deputy director of asserting its strategic interests, but also as a an even lower growth rate, which will lead to
the Opinion Research Center of
developing nation with a government deeply rising unemployment. Stalled growth could
China from 1988 to 1989.
concerned with internal stability, economic fuel social unrest.
Shi is the author of several development, and the regime’s legitimacy in Given these problems, China sees its first
books, including, Lineage and
the eyes of ordinary Chinese. The factor of responsibility in dealing with the global eco-
Village Governance in Contem-
porary China: Multidisciplinary internal legitimacy cannot be underestimated nomic crisis as stabilizing its domestic mar-
Research and Political Participa- in understanding and predicting China’s re- kets. Between September and November
tion in Beijing. He also sits on sponse to real or perceived threats to its na- 2008, China adopted a series of stimulus mea-
the editorial board of Journal tional interests. sures, including cutting interest rates three
of Contemporary China. times, lowering bank reserve requirement ra-
The author is grateful to The Financial Crisis: Participation tios twice, making tax changes, revising labor
Minxin Pei and Meredith Wen “According to Its Capabilities” law requirements for enterprises, and increas-
for their contributions to this It is important for American leaders to under- ing credit quotas. On November 9, the State
publication. Carnegie Beijing
stand that China is willing to participate in Council unveiled a bold stimulus package
consulted with the following
Chinese experts during the both formulating policy proposals and taking amounting to an estimated U.S. $586 billion,
drafting of this brief: Dr. Zhe substantive measures to contain the interna- the equivalent of about 16 percent of China’s
Sun, deputy director, Center tional financial crisis and revive global eco- 2007 GDP. The package is aimed at boosting
for American Studies, Fudan nomic growth to the degree to which it per- domestic demand over the next two years to
University; Dr. Yaqing Qin, vice ceives its capabilities permit. Accordingly, the finance programs in ten areas, primarily infra-
president, Foreign Affairs Col-
United States must temper its expectations structure. Foreign policy experts in China ar-
lege; Dr. Qingguo Jia, deputy
dean, School of International regarding how much China can contribute to gue that a healthy and stable Chinese market
Relations, Peking University. multilateral efforts. is the most important contribution China can
Avoiding Mutual Misunderstanding 3
make to the world economy. Indeed, Chinese protectionist, and the campaign rhetoric dur-
official rhetoric during the recent G20 summit ing the Democratic primaries only increased
underlined the limited role that China sees for such fears among scholars and policy mak-
itself in a concerted global action: It would ers in China. People read with alarm the
contribute “according to its capabilities.” claims made by the Obama campaign that
Though China holds $1.9 trillion in foreign labor and environmental standards would be
currency reserves, it would be wrong to view introduced into trade agreements. Further,
this as a sign of Chinese strength, much less as as the U.S. economy experiences difficulties,
a reason for China to make greater financial many expect that labor unions will pressure
commitments to a global anticrisis plan. First,
when divided by 1.3 billion (China’s popula- How public opinion is likely to affect government
tion), per capita foreign currency reserves are policy is an important new factor to consider
roughly $1,500, a modest amount. Moreover,
when formulating policy toward China.
about two-thirds of Chinese foreign currency
reserves have been invested in U.S. dollar-
based assets, such as U.S. treasury bonds. With the new administration to pass measures to
the recent reevaluation of the yuan, China has protect American workers. Thus, many in
already suffered large paper losses. If anything, China expect the new U.S. administration to
China’s foreign currency reserves are bound to face rising domestic political pressure to erect
grow more slowly as the country’s exports slow trade barriers.
and domestic consumption rises. Therefore, Most foreign policy experts and policy mak-
foreign policy experts in China suggest the ers in China hope that the new administra-
new U.S. administration lower its expecta- tion will approach trade pragmatically. They
tions on capital contributions from China emphasize that injecting protectionism into
during the economic crisis. They argue that U.S.–Chinese trade relations would neither
raising unrealistic expectations would lead to help the world economy nor return or keep
frustration on both sides and jeopardize bilat- jobs in the United States. They argue that the
eral relations. Great Depression proved that protectionism
Despite talk of American decline, foreign can inflict catastrophic damage on the world
policy experts in China expect that the United economy.
States will assume the mantle of responsibility
and leadership during this period of financial Stop Pressing China to
uncertainty. They also believe that more dra- Appreciate its Currency
matic and effective measures will be taken by According to U.S. economists, appreciation
the new administration to stabilize the U.S. of China’s currency, the RMB, would blunt
economy and reform the critical institutions in the impact of world oil and commodity prices
the international economy. As the largest de- on China, encourage economic activity in
veloping nation, China expects to participate the service industry, and raise domestic con-
in the process of creating and reforming inter- sumption of goods imported from the United
national regulatory institutions to make them States. From the perspective of Chinese econ-
able to respond to future financial crises. omists, revaluation would further reduce the
competitiveness of goods produced in China
Protectionism is not the way to and further jeopardize the Chinese economy.
deal with the current economic crisis Nor is revaluation of the RMB seen as likely
Many experts in China are worried about the to serve American economic interests, because
possibility of protectionism under an Obama China would be forced to purchase less
administration. Democrats are stereotyped as American debt at a time when rising federal
4 POLICY BRIEF
deficits require greater purchases from coun- Tsinghua University believe that the SED has
tries like China. From a political perspective, gone a long way to cool rhetoric between the
many ordinary Chinese citizens view the U.S. two countries, and they urge continued active
demands to revaluate the RMB as an attempt engagement on senior levels. For the United
to limit China’s growth. Most experts in China States, this has meant designating the treasury
believe that as official policy, the United States secretary and the national economic adviser to
should cease to press for further appreciation lead the U.S. side; on the Chinese side, the
vice-premier has led discussions and has been
Injecting protectionism into U.S.–Chinese trade supported by the largest and highest-ranking
body of inter-ministerial officials in China.
relations would neither help the world economy
The symbolic, as well as actual, importance of
nor return or keep jobs in the United States. these appointments has helped avoid bureau-
cratic red tape that characterizes Chinese poli-
of the RMB. According to them, it would tics and misunderstanding on both sides. To
most likely be a fruitless endeavor in the cur- this end, many also recommend curbing what
rent economic climate and would waste politi- they describe as hostile language directed at
cal capital that the new U.S. administration China through the mainstream media. They
could use to pursue its other economic initia- say challenging China in highly public ways
tives with China. In their view, at a time of makes it difficult for Chinese leaders to com-
global financial instability, the best course for promise; their maneuverability is increasingly
China to take would be currency stability. hamstrung by public pressure to respond ag-
gressively to real or imagined U.S. slights.
Mechanisms for Economic While the CCP views growing nationalism
Cooperation: The U.S.–Chinese among its people as a potential threat to sta-
Strategic Economic Dialogue and bility, to retain the popular mandate it claims
Lessons for Engagement the people have granted, the CCP must satisfy
There is a consensus among experts on the the demands of national pride. Confronting
Chinese side that the U.S.–Chinese Strategic China publicly may score points in U.S. do-
Economic Dialogue (SED) has been a posi- mestic politics, but to achieve positive results,
tive force not only for economic ties but also officials at the highest level must engage each
for movement on many other bilateral issues. other and attempt to stay above the domes-
Since 2006 when Treasury Secretary Henry tic fray. Political posturing by both sides has
Paulson and President Bush first established undoubtedly damaged relations between the
the SED, face-to-face senior-level discus- United States and China in the past and has
sions have been a constructive means of com- made measured responses by China difficult.
municating intersecting interests, bypass- Chinese leaders will be more open to conces-
ing bureaucracy, building relationships, and sions when their legitimacy at home is not at
avoiding futile “megaphone diplomacy.” stake.
Perhaps the most valuable lesson learned The enthusiasm with which these talks have
though these dialogues is that private chan- been embraced by both Chinese policy experts
nels are usually more conducive to posi- and official media offers important insights
tive outcomes in negotiations with China. into the Chinese political process. The SED
Common experience has taught businessmen has received extensive and favorable coverage in
in China that trust and consensus are key China’s official media and has been embraced
elements of success, and this holds true in by the public as a forum in which China is
this case as well. Professor Qingguo Jia from treated as a respected and equal partner. This
Peking University and Professor Zhe Sun from means there is room for the United States to
Avoiding Mutual Misunderstanding 5
pursue its agenda, while reassuring Chinese of- ally. The widespread consensus is that he is truly
ficials that further reform of its economy is in committed to pursuing a multilateral foreign
the interests of both countries. It can also be policy. The real challenge lies in deciding how
used to diffuse the inevitable tension that arises such coordination can be achieved in practice.
when communication occurs only through the Scholars in China see three channels. First,
media. In addition to continuing the SED, the United Nations, which is recognized as an
experts recommend that the Obama admin- authority by most countries but suffers from
istration take the initiative to begin a broader inefficiency and often insufficient support,
dialogue early on, since personal, high-level particularly when major powers disagree. The
engagement has proven a stabilizing force be- second is the G8. However, the G8 does not
tween the United States and China. include any rapidly developing countries, and
agenda through cooperative channels rather so that the major powers can work together to
than in confrontational settings. Above all, manage the global economic crisis and address
patience and perseverance are needed in try- common concerns, such as North Korea’s nu-
ing to advance America’s human rights goals clear capabilities and the Middle East.
in China. In retrospect, argued by foreign
policy experts we talked to, the most signifi- Thinking Strategically on Taiwan
cant progress in human rights in China in the Taiwan remains a priority concern for the
last three decades has come about mainly as a Chinese military, government, policy experts,
result of Washington’s long-term, consistent, and ordinary citizens. After eight turbulent
and patient engagement with China. years, scholars of international relations and
government officials believe it is time for
America to reevaluate its Taiwan policy.
Experts recommend that the Obama As mentioned, public opinion has an in-
administration take the initiative to begin a creasingly important influence on China’s
broader dialogue early on, since personal, policy making. The Internet has not only al-
high-level engagement has proven a stabilizing lowed Chinese citizens to access information
force between the United States and China. from sources abroad but also has provided the
space for them to criticize the regime’s foreign
policy decisions. Taiwan is the most important
Strategic Relationships issue in Sino–American relations for ordinary
With China and Russia Chinese. It puts the CCP under intense pres-
Chinese experts agree that the relationship sure to respond aggressively to any actions the
between Moscow and Washington is at its United States makes in the region or risk the
lowest point since the Reagan years. The past ire of its citizens. Survey research shows that
eight years have been marked by Russian U.S. involvement in Taiwan constitutes the
hostility toward American unipolar foreign major source of anti-Americanism in China,
policy in the Middle East and Washington’s both for people who have access only to offi-
high-handedness toward Moscow on many cial media and for those who also have regular
issues critical to Russian national interests. access to media from Hong Kong or Taiwan
In the wake of the armed conflict between or both. The recent (October 2008) White
Russia and Georgia, it is critical that the House announcement of a $6.4 billion arms
Obama administration repair its relationship sale to Taiwan was widely perceived by ordi-
with Moscow. nary Chinese as trying to contain China’s de-
China and Russia have managed to over- velopment by aiding “separatist movements.”
come their traditional suspicion of each other Given the recent opening of official dialogue
and develop a normal relationship over the between mainland China and Taiwan, foreign
past decade. Experts agree that it is in the policy experts in China overwhelmingly be-
United States’ best interest to cultivate stron- lieve that the Obama administration should
ger ties with both countries. China also wishes withhold further arms sales to Taiwan in the
for a speedy repair of U.S.–Russian relations near future.
Avoiding Mutual Misunderstanding 7
RESOURCES
The Carnegie Endowment Visit www.CarnegieEndowment.org/pubs for these and other publications.
for International Peace is a
China Says Web Use Surpasses That in U.S., David Barboza, International
private, nonprofit organiza-
Herald Tribune, July 25, 2008.
tion dedicated to advancing
cooperation between Effect of Crisis “Worse Than Expected,” Fu Jing and Wang Bo, China Daily,
nations and promoting active November 13, 2008.
international engagement by
the United States. Founded Industrial Growth Slows to a Crawl, Fu Jing, China Daily, November 14, 2008.
in 1910, Carnegie is nonparti-
WB: China’s GDP to Slow to 7.5% in 2009, Xin Zhiming, China Daily,
san and dedicated to achiev-
November 25, 2008.
ing practical results. Building
on the successful establish- China to Stabilize Global Financial Markets by Maintaining Growth, Xinhua
ment of the Carnegie News Agency, November 9, 2008.
Moscow Center, the Endow-
ment has added operations Bumpy Road Ahead for Sustainable Sino–U.S. Ties, People’s Daily, May 8, 2007.
in Beijing, Beirut, and Brus-
SED Ought to Remain in Force, Yuan Peng, People’s Daily, December 5, 2008.
sels to its existing offices in
Washington and Moscow. China Denounces U.S. Proposed Arms Sale to Taiwan, Du Guodong, Xinhua
News Agency, October 4, 2008.
FOREIGN
POLICY
for the Next President