Blog Post #9 The Truth About U.S. - China Relations

 Everybody’s heard the rhetoric on U.S. China relations. They’ve heard politicians lambast China
for a variety of human rights abuses and aggressively expanding their territory in the South
China Sea. They’ve also heard legislators in the Democratic Party framing competition with
China as a main reason to pass legislation such as the CHIPS Act (which incentivizes domestic
semiconductor manufacturing). While it’s true that China poses a threat to the Post-WWII
rules-based international world order, we should not be viewing this relationship with China as a
looming catastrophe. In the authoritarianism-versus-democracy scenario that President Biden has
laid out, there actually is a lot of hope for our relationship with China if you look at it through
the lens of political economy.

Before anybody can understand why there’s a positive path forward with U.S. and China
relations, they need some background. Dr. Yuen Yuen Ang of Johns Hopkins has studied
corruption in many countries and analyzed the political economies of the U.S. and China. She
talks about three modern Chinas. First there was Mao’s China, a personalist dictatorship with
widespread oppression and little economic growth. Then there was Deng Xiaoping’s China,
which began the record economic growth that led to China becoming the powerhouse it is today.
He instituted some democratic reforms in order to integrate a capitalist economy with a
communist system and was relatively successful. With that said, integrating a capitalist economic
system with a communist political system without the rule of law also led to corruption, which
snowballed and led to China’s first Gilded Age.

Finally there’s Xi Xinping’s China. Dr. Ang believes that the U.S. is in its 2nd Gilded Age and
China is in its 1st. After analyzing China’s extensive corruption and political economy, she
concluded that Xi Xinping is moving China back into a personalist dictatorship, much like Mao’s
China. Xi Xinping’s incessant power-grabbing led to a purge of senior administration officials,
including his economic premier Li Keqiang, who died suddenly after being removed from his
position. In the new personalist dictatorship led by Xi Xinping, staff and other administration
officials are only going to tell President Xi what he wants to hear. Plus, in order to get out of
gilded ages, governments have to institute moderate reforms. Li Keqiang was the leader most
likely to embrace moderate reforms, not Xi Xinping. Dr. Ang believes President Xi is more
likely to issue diktats.

With Xi Xinping leading China down a dark path politically, it is unlikely the political economic
system of China will progress past the 1st Gilded Age anytime soon. This is not good news for
their economy. China is primarily an export economy, but overproduction and oversaturation in
the export market has led to investment that was otherwise going into exports being pumped into
real estate. That created the largest bubble in modern political economic history. Unless the
Democrats lose in November, or abandon their commitments to drastically reduce inequality and
move past the 2nd Gilded Age (for more on this see my other blog posts), America has a good
chance of maintaining its lead on China. That’s bad news for the Chinese people in the
short-term, but maybe over the long-term it will lead to more lasting democratic reforms. This is
not to say we should subscribe to the pipe dream that China might become a democracy, but we
can hope it will eventually become less autocratic and aggressive and more peaceful and
cooperative. Until that happens, equipping Taiwan and other vulnerable Chinese neighbors with
sufficient technology to defend themselves and using aggressive diplomacy to maintain peace
and work together is a smart strategy for the U.S. in the near future.