Connecting Regions of Asia.

Dragon Watch : China Through Goldman’s eyes

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In a time when anti-China analysis is fashionable and pervasive, David Goldman’s You will be assimilated is a welcome contrarian and nuanced view of what China does right and how its system works. This could be an important contribution to shaping a more comprehensive approach to China in America, as it eloquently tells Americans some of the trappings of Chinese thinking. In this, some of the old “China hands” like myself – who have been in China too long and have possibly “gone native” –  may fail. We may believe that many issues are obviously self-explanatory.

Goldman tells beautifully:

The United States is the one big idea that made America the world’s only superpower after the collapse of the Soviet Union. That idea is to drive fundamental R&D through the aggressive pursuit of superior weapons systems, and let the spinoffs trickle down to the civilian economy. China is like a two-stage rocket. The export-driven, cheap labor economy that turned China from an impoverished rural country into a prosperous urbanized giant after the Deng Xiaoping reforms of 1979, was only the booster. […] America’s response to China’s global ambitions is a failure. There are two big reasons for this failure. First, we chronically underestimate China’s capabilities and ambitions. Second, we need to address our own problems. China envisions a virtual empire in which game-changing technology dominates production, purchasing, finance, and transportation. It puts massive resources into basic research, science education, and infrastructure. America’s commitment to basic research and science education has shrunk to roughly half its size during the Reagan Administration. Just 5 percent of our college students major in engineering, compared to one-third in China».

A bumblebee shouldn’t fly but actually does

He then rightly argues there are several false myths in looking at China. Basically, the US misinterprets China as it sees China through its own system-tinted glasses. Goldman says it is like a bumblebee that shouldn’t fly but actually does. Perhaps we can use another entomological analogy, taken from the century-old essay On Being the Right Size by J. B. S. Haldane. People asked, Why can spiders effortlessly climb over walls when we can’t? Simply because gravity applies to you according to your shape and size, he answered.

Similarly, China defies our vision, and in the two most crucial areas, innovation and sustainability of debt, manages quite well, argues Goldman in a critical point.

Yes, China does – but why?

The feeling is that China defied Western “gravity” in innovation and debt by reshaping its internal and external environment.

About innovation for instance. In 2004 General Liu Yazhou wondered how China could innovate, as innovation needs freedom to grow. In fact, in the following years, China did manage to innovate by creating a special atmosphere of “different freedom” for its scientists with basically three elements.

  1. There is not political freedom but “life freedom.” In China there is no political correctness, and innovators enjoy a much more easy-going life of privilege than in the US.
  2. There has been a revolving door so far with the US and Europe, where Chinese innovators were also part of an international community and Chinese meshed into the West.
  3. China built an attractive internal system made of patriotism, special privileges for local innovators (who could become very rich), and the “China success” story that made moving back more attractive to Chinese innovators.

On the enormous “unsustainable” Chinese debt. China’s large debts are sustained by a mix of keeping the RMB not fully convertible, keeping its internal market semi-closed to foreign competitors, high reserves, high savings, a high spread between borrowing and loan interest from banks, and a high GDP growth rate that eventually shrinks the debt as a percentage of GDP. That is, there are huge margins to cushion debts.

It flies, but it can also drop

Yet on both fronts there are fault lines. If the US and the Western world closes to Chinese scientists and a harsher crackdown on political dissent steps in, the social controls may overwhelm Chinese innovators, who, kept inside, find the air becomes mustier. Plus, the “China success” story becomes less attractive if Chinese people are confined to China.

The sustainability of debt has similar drawbacks. If growth slows down, reserves dwindle, savings rates drop, and debt ratio-to-GDP increases, the cushion thins out.

This won’t hurt China overnight, but if it lasts over years, it could make China’s life more difficult. This is already happening around China and things could get tougher. Again, Beijing will not sit idle in front of this. China has proved its ingenuity time and again, and it could do so again.

However, the reality for China is that its measures are “stratagems” (ji 计) to overcome objective hurdles: a not-free political and cultural environment, and a largely planned economy. That is, if China wants to carry on, it has to find a way to have free politics and economy without toppling the present cart. Can it be done? Perhaps yes, but this is a different story.

For the US, the analysis is more straightforward: there is a lot to learn from China for the US, such as better physical and non-physical infrastructure (schools, broad education) and better connections with the rest of the world.

The China story is not about US-China; it is about China’s historical and constant attempt to assimilate the world. This cannot work because 500 years of progressive Westernization can’t be overturned in five or 50 years.

But if the US doesn’t have a comprehensive strategy to deal with China, not one-on-one but as leader of a coalition, Japan, Vietnam, and India by themselves, even without Australia and the US, will not yield but may violently clash with China. China cannot deal with the Westernized world as it did with its periphery for three millennia. The US can’t deal with a world where China, India, Indonesia, and Africa are rising as it did with the USSR or with Germany and Japan during World War II.

That is, both the US and China would be better off if they reformed, and these reforms could stave off the present growing Cold War. Will they do it?

The hope is that Goldman’s book helps us see this necessity.

(Francesco Sisci is a Beijing-based Sinologist and author of “Brave New China”)

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