China's new challenges to the U.S.

I am in China the entire month of May to teach public management in the Schwarzman Scholars program, established through a donation from private equity titan Steve Schwarzman to create a sort of China version of the Rhodes Scholarship.

The scholars, a large proportion of whom are right out of college, include more with an orientation to public service than I had expected. The program, and many of the scholars, are dedicated to better understanding between the United States and China, and to deepening the U.S.-China relationship.

Right now, however, this orientation is battling against strong tailwinds. Beyond the day-to-day headlines of trade tensions are some trends that have sharpened even in the last year or two that increase the challenges China poses to the United States. These all are results of the increasingly obvious and substantial rise of China.

These new challenges are in the domains of economics, politics, and values and ideology.

Economic tensions between the U.S. and China have been substantial since China joined the World Trade Organization in 2001, and they were of course a major issue in President Donald Trump’s 2016 campaign. But these tensions have traditionally arisen from Chinese competition in low-end industries such as umbrellas, traditional industries such as steel, and production of American products by US companies with factories in China. For as long as I can remember, there was a common narrative in the U.S. that China could never be strong in innovation-intensive industries such as tech.

Part of the argument involved the lack of freedom in China. To simplify, an important part of the story was that a country that blocked Facebook would be cut off from the free flow of ideas that is so important for innovativeness. (I remember that presidents as early as Bill Clinton argued China would need to unblock the Internet on pain of remaining a tech backwater.)

The second part of the narrative involved crony capitalism, where the way to become rich was through political connections. Here too, it was felt, this would significantly hold back the economy.

In the last year or so, however, that narrative has come under challenge. Chinese innovativeness is working far better in practice than in theory. Facebook is still blocked, but Chinese internet innovation has started to flourish. The social media app WeChat pioneered new technologies, such as being able to dictate comments directly into a user’s account, and lots of links between the app and mobile payments, where China is years ahead of the U.S. (China’s equivalents of ApplePay are more or less universally used.)

China also is ahead in drones and seems to have caught up in artificial intelligence. Startups, including tech unicorns, are everywhere. We are still ahead, but there is now a serious and unexpected challenge to the U.S. from Chinese tech.

The second new challenge is political. The earlier years of China’s rise took place in a context where the Chinese leadership wanted to avoid taking on the U.S. – for many years, China’s leaders called for the country to “hide our capabilities” and “bide our time.” Clearly, that is now history. And the period since Trump’s inauguration has seen a large increase in China’s profile on the world stage, partly due to Trump’s withdrawal from the United States' long-established role as a leader of the international community.

A marker of this was Xi Jinping’s widely noted speech at the Davos summit in early 2017, when Xi laid claim to leadership in the defense of globalization. I have noticed in this past year that China’s big international initiative, the “Belt and Road” effort to increase China’s influence in central and east Asia, southern Europe, and Africa by financing infrastructure tying those countries’ trade to China, has moved from being totally unknown in the U.S. to actually getting attention from companies and policymakers.

Yet perhaps the most dramatic event on the political front may be the publication last year of the book Destined for War by my colleague Graham Allison (there is a question mark in the subtitle), which noted that most cases in world history where a rising power challenged an incumbent great power produced a military conflict. This has put on the agenda the thought that China’s challenge could lead to war between the two countries.

The third new challenge is in the area of values and ideology. Until a few years ago, whenever I asked Chinese professors or students whether China would become more democratic, the answer took the form of “give us time.” The superiority of democracy was taken for granted, as was the view that China should aspire to it. The argument was that, with low educational levels in much of China and weak traditions of non-violent discourse, China wasn’t ready for democracy quite yet.

In the last year or so, that line has changed as well. “Give us time” has been replaced with “what’s so great about American democracy?” Chinese leaders and more and more ordinary Chinese are saying that China’s political system produces more stable and long-term policies, and more vigorous action, than America’s cacophonous chaos. This evolution has been helped along by Trump actions that, for many, put democracy in disrepute.

There is a new, more ominous world of U.S.-China relations that has arisen. Many Americans are still caught in the older challenges and haven’t coped with the new ones. My guess is that this will be changing.