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China and USA relationships
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7 simple questions and answers to understand China and the U.S.If American political candidates have a favorite punching bag, it's China. Wonkblog's Ana Swanson explains why so many candidates change their tune once elected, and just how important the U.S.-China relationship really is. (Jorge Ribas/The Washington Post)
The United States is rolling out the red carpet this week for
the leader of the world’s most populous country. Chinese
President Xi Jinping will first visit with tech executives and
other industry leaders in Seattle, then head to
Washington to meet with President Obama.
The meeting is a touchstone moment in an
increasingly tumultuous relationship. The Obama
administration has been preparing sanctions against China
following a wave of cyber-espionage from Chinese hackers.
And China has sparked the ire of U.S. businesses and
politicians by devaluing its currency and favoring Chinese
businesses over foreign ones.
Despite the tension, China remains one of the most
important countries in the world for Americans. China is so
big and fast-changing that its actions ripple around the
world and influence life for average Americans —
determining the price of things we buy, influencing what we
make at our jobs, even changing the quality of the air we
breathe.
But maybe because of its size, or its distance, or its
complexity, it can be hard to grasp exactly why China
matters. Here are seven questions — and answers — that
will bring you up to speed on the state of China, and
America's relationship with it.
1. Why does China matter? | 2. Is China still a poor country,
or is it rich and powerful? | 3. What do the Chinese really
want? | 4. Is China still communist?| 5. Is China's economy
in trouble? | 6. Will China surpass the U.S. as the world's
superpower? | 7. Should the U.S. view China as a threat or
an opportunity?
1. Why does China matter?
For America, China is arguably the most important country
in the world.
One reason is that China is just really, really big. One in five
of all the people on the Earth lives in China. It’s the world’s
second-largest economy after the U.S., accounting for about
12 percent of the world economy and about a quarter of
global growth in recent years. It is America’s second-
largest trading partner.
China is also important because its incredible pace of
growth in recent years is transforming not just the lives of
its own people, but also of people all around the world.
One of the main ways China influences other countries is
through trade and business ties. China has long been
known as the factory to the world, pumping out a
disproportionate share of the world's iPhones, clothing,
shrimp and Christmas decorations.
The influx of cheap Chinese imports has helped some
Americans and hurt others. It has raised standards of living
for many Americans, allowing them to afford all kinds of
things they couldn't have purchased before. It has
alsosupported American jobs in fields like transportation,
retail, construction and finance.
But it has meant a loss of jobs in manufacturing. The share
of Americans working in manufacturing fell from more
than 13 percent in the late 1980s to 8.4 percent in 2007 , as
trade with China increased and its imports into the U.S.
soared, as this graph shows:
The China Syndrome: Local Labor Market Effectsof Import Competition in the United States, http://economics.mit.edu/files/6613
The lesser-known side of the story is that China is also now
a major consumer of U.S. goods. About one-quarter of the
soybeans grown in the U.S. go to China, as well as one in
five of planes manufactured by Boeing. Apple now sells
more iPhones in China than in the U.S. China is also a big
consumer of American services, like education: One in three
foreign students in the U.S. is now from China.
No matter what kind of business you look at, China
probably affects it, says Scott Kennedy, deputy director of
the Freeman Chair in China Studies at the Center for
Strategic and International Studies, a Washington think
tank. “Even if you’re not doing business in China, you’re
most likely facing some kind of Chinese competition, or
China’s effect on the global economy affects your sector.”
Another way China is reshaping the world is through its
voracious appetite for resources, to feed its factories and
build new roads and cities. China accounts for about half of
the aluminum, copper, nickel, steel and concrete used
worldwide each year, making it a major customer for
resource-rich countries like Australia and Brazil.
Visual Capitalist, http://www.visualcapitalist.com/china-consumes-mind-boggling-amounts-of-raw-materials-chart/
China's appetite for resources is so big that the country
actually used more concrete in the last three years than the
U.S. did in the entire 20th century. (This animation, which
shows how Shanghai transformed from 1987 to 2013, helps
explain how that might be possible.)
1987 (Reuters); July 31, 2013. (Carlos Barria/Reuters)
China is important to the U.S. for security reasons, too.
China is now the dominant power in East Asia, a
region with close U.S. allies and vital shipping lanes.
China and the U.S. have some serious conflicts, for example
over cyber attacks on government and business secrets, and
China’s clashes with its neighbors over territory in the East
China Sea and South China Sea. But the U.S. and China
cooperate on issues like climate change and counter-
terrorism, and China has supported U.S. led efforts to
contain North Korea's and Iran's nuclear programs.
2. Is China still a poor country, or is it rich and powerful?
China, on the whole, is certainly a powerful country — able
to forge new trade agreements, launch new international
institutions, and send probes into space. But on an
individual level, its people are not that rich — at least not
yet.
In fact, the average American earned more than four times
as much as the average Chinese person did in 2013, making
$53,000 vs. $11,885. (This is on a purchasing power parity
basis, which actually makes those in poorer countries seem
relatively richer, since it accounts for the cheaper cost of
many goods and services in poorer countries.)
Those income levels might seem low for an American, but
for the Chinese they are actually a huge improvement. Back
in 2000, an average American was earning 13 times as
much as the average Chinese; in 1980, the difference was
42 times.
How many times wealthier is the average American than the average Chinese? In 1980, the average American earned $12,575.57 per year in current international dollars, while the average Chinese earned $302.31 -- a gap of 42 times. But by 2015, this gap had shrunk to four times.
In the 1970s, average Chinese aspired to buy what were
called the “four musts”: a bicycle, a radio, a wristwatch and
a sewing machine. By the 1980s, that list included a
washing machine and a television, and today people aspire
to afford cars and international vacations.
This growth in incomes over the past 40 years has lifted 500
million people in China out of poverty. The Chinese are
becoming a true middle class in a global sense, earning
more than India, Africa and much of the Asia-Pacific but
less than Europe and the U.S., as the graph below shows.
The chart shows global wealth broken down by decile, or
every 10 percent of the world wealth distribution.
Credit Suisse 2014 Global Wealth report, https://publications.credit-suisse.com/tasks/render/file/?fileID=60931FDE-A2D2-F568-B041B58C5EA591A4
But of course, averaging things obscures the real situation
for a lot of people. China is now one of the world’s more
unequal countries. Much of the wealth – and the
country’s new crop of millionaires – is concentrated on the
eastern coast, while in China’s interior hundreds of millions
of people are still basically subsistence farmers.
Here's a map that shows how that wealth is concentrated.
The darker blue areas along the coast are the cities of
Beijing and Tianjin in the north, and the city of Shanghai in
the middle, where average incomes are more than three
times as much as the interior:
Looking at China from the U.S., what we see most is
China’s impressive economic growth and expanding
international influence. We rarely see the reality on the
ground — that internally, China faces many challenges and
quite a bit of disorder.
China faces a whole host of problems that go along with
being a rapidly developing and a relatively poor
country. For example, China struggles to provide the public
services that Americans take for granted, like public
education for all, safe drinking water, and decent medical
care. And while the Chinese government may seem all-
powerful, its influence only goes so far. Many people still
evade income or real estate taxes with impunity, while
many businesses shirk government regulations.
3. What do the Chinese really want?
The simple answer is “a lot of different things,” because
there isn’t just one China. China can often seem monolithic
from the outside, but internally it’s a diverse country where
people have lots of different opinions, even if they can’t act
on them politically.
When it comes to China’s leaders, it’s safe to say they want
what any government around the world wants: to stay in
power.
President Obama with Chinese President Xi Jinping in Beijing. (Andy Wong/AP)
In practice, that has meant delivering economic growth and
raising standards of living. For China's current leader, Xi
Jinping, it has also meant stamping out corruption, which
many people believe was eroding the party's
popularity. Since entering office 2½ years ago, Xi has
launched an extensive crackdown on corruption,
investigating tens of thousands of Chinese — including Xi's
own political enemies.
China has become more assertive overseas and repressive
at home under Xi's authority. It's clear that he, and many
other Chinese as well, want their country to be restored to
what they see as its rightful position as one of the world's
great powers — a broad goal of national rejuvenation that
Xi has coined "the Chinese dream."
Americans tend to think of China’s rise as happening in the
past few decades, but many Chinese have a longer memory.
China has one of the world’s oldest civilizations. To those
with a long view of history, China's position as a
relatively poor country in the early 20th century is the
aberration, following thousands of years when the country
was without question one of the world's great powers. The
chart below shows just how dominant China's economy has
been for the last 2,000 years:
Michael Cembalest, JP Morgan
In fact, Chinese call the period of history between 1839,
when China lost parts of its territory to foreign countries in
the first Opium War, and 1949, when the Communist
revolution occurred, “The Century of Humiliation.” This
memory of humiliation at the hands of foreign powers often
goes hand-in-hand in China with nationalism and anti-
foreign sentiment.
So restoring China's international luster is a priority of the
government and regular people alike. However, most
Chinese are still far more concerned with everyday
challenges, like housing prices and job opportunities.
For most people, scandals that impact daily life —
like villages with soaring cancer rates, or tainted infant
formula — are more keenly felt than political issues. In fact,
when Chinese gather to protest, the cause
is often pollution,working conditions or real estate prices.
4. Is China still communist?
For a country that nominally follows communism, China has
a lot of Ferraris. That's because the Chinese economic
system has changed dramatically since communism — the
philosophy spawned by Karl Marx which argues that
workers should collectively own the means of production,
like factories, property and machines — first took over the
country.
The People's Republic of China was founded in 1949 after
several decades of bloody conflict between the Communist
Party of China and a group called the Nationalists. After the
communists finally won, the Nationalists fled to Taiwan and
founded the Republic of China, which the U.S. supported as
the legitimate Chinese government for decades.
Under its new leader, Mao Zedong, China closed itself off to
the West and dramatically reorganized its society. Workers
initially lived in communes organized around farms or
factories. People didn't use money to buy things, but were
given rations of food and other small necessities. The state
determined what jobs people did, what they ate, even what
songs they sang:
Mao ruled China for a quarter of a century. While he helped
modernize China in some ways — educating women, and
establishing a basic system of public health, for example —
he also presided over some ghastly moments in history,
including a famine that may have killed 36 million to 45
million people. The official line in China is still that Mao
was 70 percent correct and 30 percent wrong .
In the late 1970s, Mao died. A man named Deng Xiaoping
(“xiao” is pronounced like the first syllable in “shower”)
took over and began opening up China to the outside world.
Deng believed strongly in the communist party, but he was
also a pragmatist who wanted to lift China out of poverty.
He famously said, “It doesn't matter whether
a cat is white or black, as long as it catches mice” – in other
words, that China could adopt any system that worked, be it
communist or capitalist. He also coined the phrase that has
basically become China’s mission statement: “To get rich is
glorious!”
Chinese leader Deng Xiaoping tries on a cowboy hat, a symbol of the U.S., at a rodeo in Simonton, Tex., in 1979. (AP)
To help people get rich, Deng began allowing foreign
investment in China’s coastal areas, and loosened
restrictions on the kinds of things people could buy and sell,
and the types of jobs they could do. Chinese agriculture
boomed as farmers were rewarded for their sales, village
collectives began manufacturing TVs and other appliances,
and foreign-funded factories cropped along China's coast.
China changed and opened up a lot, but the old rules were
altered piece by piece, rather than being fully abandoned.
That’s why the country today is still a bewildering mix of
capitalist free markets in some parts of the economy and
tight state control in others.
There are some vestiges of communism in China that
Westerners find perplexing. For example, the party actually
owns all the land in China. Rural farmers can't sell their
land, because farmland is technically owned by everyone.
And when city dwellers “buy” apartments, they are
technically only leasing them from the government for 70
years.
But while China is, in practice, mostly capitalist, the
Communist Party still rules all.
The party is ultimately in control of the government, the
military and many businesses. Most importantly, the party
is in charge of appointing almost every important person to
their position, including government ministers, CEOs,
university presidents and newspaper publishers. It is also in
charge of deciding who gets promoted in the party itself .
About 6 percent of Chinese people are members of the
Communist Party — a group of 86 million that includes
almost all government officials, business leaders and other
social elite. Most government officials have a position both
within the party and the government. For example, when
China’s leader, Xi Jinping, comes to the U.S. he will use his
government title of president, because that’s more familiar
to Americans. But in China, his most important position is
general secretary of the Communist Party.
China has promised to open up more of its markets to
foreign competition, but don’t expect it to adopt a Western
system anytime soon. In the nearly three years that Xi
Jinping has been in power, he has strengthened his and the
party’s control over Chinese politics, business and the law.
5. Is China's economy in trouble?
You may have heard recently that the Chinese economy has
some problems. That's true, but it also still has a lot of
potential.
China’s growth is slowing down. Following decades of
double-digit growth, China’s economic growth slowed to 7.7
percent last year, and shows signs of decelerating further.
This has countries around the world worried, especially
countries that export a lot of resources to China, like
Australia or Brazil. But for China, the growth slowdown is
not, in itself, necessarily a bad thing.
For one thing, slowing down is pretty natural after so many
years of rapid growth. China’s growth has been, in every
sense, extraordinary. The country experienced an eight-fold
increase in living standards in 30 years – an increase that
took the U.S. 122 years and Japan about 80. As economist
Barry Naughton puts it, China’s growth is slowing in part
because it has graduated early.
As China’s economy has developed, the wages its workers
earn have risen, too. This is great for average Chinese — it
means they can afford better food, houses, cars and health
care — but it also means that low-cost manufacturing jobs
are tending to leave China for lower-cost countries like
Vietnam, Bangladesh, even Mexico. China has also
exhausted most of what economists call “catch-up” growth
from acquiring the technologies of more advanced markets.
As countries catch up and get richer, their growth just
tends to slow.
The problem is where China chooses to go from here. The
country needs to develop new sources of growth that are
consistent with being a wealthier country, with a more
skilled and higher paid workforce. But China's progress
toward this goal is uneven and uncertain. China wants to
keep its population fully employed. But instead of putting
energy into finding new sources of growth for the economy,
the government has often turned to wasteful and heavy-
handed methods for propping up growth.
For example, as China’s exports to the world slowed with
the global financial crisis, the country shifted to pumping a
lot of money into investment in infrastructure, housing and
manufacturing capacity to prop up growth. Many of those
investments were useful and profitable, but others were
not, and as time went on, they became less so. China
built bridges to nowhere, stadiums that stand empty, and
its infamous "ghost cities" — newly built cities with no one
living in them. In a country where many people are still
relatively poor, many of these investments were a tragic
waste of money.
In the short term this kind of activity is recorded as
economic growth, but in the long run it is obviously
wasteful. These activities have caused the debt owned by
the government, banks, corporations and households to
balloon to282 percent the size of the economy, a far higher
debt burden than most developing countries, as well as
Australia, the U.S., Germany or Canada, as the graph below
shows. An unknown amount of these loans will probably
never be paid back.
McKinsey and Company, http://www.mckinsey.com/insights/economic_studies/debt_and_not_much_deleveraging
Instead of continuing to pump money into infrastructure,
China needs to find new sources of growth that are
consistent with being a wealthier country. That entails
opening up new parts of the economy to private companies
to create jobs that require more skills and offer higher pay,
like those involving the service sector, entrepreneurship
and innovation.
There are certain changes that China could make to jump-
start growth. It could, for example, allow rural farmers to
buy and sell their own land, or open up sectors dominated
by one or a few state owned companies, like telecom, to
new competitors.
In 2013, China’s top leaders made a high-level pledge to
“let the market play a decisive role,” a change that would
help the country’s economy shift in this kind of direction.
However, these reforms mostly have yet to be realized.
People are worried about whether China can pull off this
economic transition in the future, and those concerns
have contributed to a volatile stock marketand a lot
of money flowing out of the country.
China faces other challenges. For one, its population
is aging rapidly, in part due to a policy that limited Chinese
parents to having only one child. That means that a smaller
population of working people will soon have to support a
huge numbers of retirees, as well as themselves, a dynamic
that could sink the economy. For many years,
economists have been asking, “Will China get old before it
gets rich?” The answer is still not clear.
6. Will China surpass the U.S. as the world's superpower?
Recent polls show Americans are very worried about
Chinese cyberattacks, its growing military power, and the
amount of American debt it holds — though actually, the
Fed holds a lot more U.S. debt than China and Japan do .
Pew Global, http://www.pewglobal.org/2015/09/09/americans-concerns-about-china-economics-cyberattacks-human-rights-top-the-list/problems-battery-by-u-s-party/
Interestingly, many Americans appear to believe that China
is already the world's superpower. But this isn't true, and it
seems unlikely to happen any time soon.
The U.S. is still, by almost every measure, the world’s
superpower, wielding much more military might, economic
power, and influence over other countries than China
has. We may be gradually moving toward a bipolar world
where the U.S. and China share that distinction equally, but
we’re not quite there yet.
"I think the reality is that China is not nearly as strong as it
wants to be perceived and as many U.S. analysts like to play
them up," says Rodger Baker, the vice president of analysis
at Stratfor, a geopolitical intelligence and advisory firm.
What is clear is that China has become a strong regional
power, able to hold its own against the U.S. in East Asia.
This continues to be an area of conflict. The U.S. wants to
remain centrally involved in Asia, but China wants to
control its own region and prevent the U.S. from being able
to contain it, says Baker.
In the South China Sea and East China Sea, where China
claims as its own territory waters that are also claimed by
U.S. allies, including South Korea, Japan and the
Philippines, China is trying to keep the U.S. from
intervening so close to its territory, says Baker. "It’s not on
the global scale that China would be a challenge to the
U.S., but certainly in the waters around the South China
Sea and East China Sea," he said.
7. Should the U.S. view China as a threat or an opportunity?
The U.S.-China relationship is broad, deep and complex,
with tons of ties between our countries, including business
partnerships, study abroad programs, co-produced
movies, military exercises, counter-terrorism efforts,
and joint studies of disease.
Some parts of the U.S.-China relationship are troubled and
adversarial — for example, it's not yet clear how the
countries will handle rising tensions over hacking attacks
and the looming threat of cyber warfare, or territorial
disputes in the South and East China Sea.
The countries have some significant economic disputes.
U.S. politicians decried China's recent devaluation of its
currency — though China claimed the move was actually
directed at reforming the way it manages its currency, in
line with international recommendations. The U.S. business
community protests that the playing field in China for local
and foreign businesses is far from even, and some have
begun pushing for the idea of reciprocity — that when
China bans a U.S. business, the U.S. should begin banning
Chinese businesses, too.
The U.S. and China also have significant ideological
differences that make the relationship hard to
navigate. China’s tight state control on religion, the press
and democracy rankle Americans. These conflicts have only
gotten worse under Xi Jinping, who has led prosecutions
of lawyers, journalists, NGO workers and foreign business
people for failing to fall in line.
The idea that the political system in China, the second-
largest economy in the world and the most populous
country in the world, "is moving in a direction that is so
antithetical to American values is a scary thought," says
Kenneth Lieberthal, a senior fellow at the Brookings
Institution.
Overall, the countries have basic conflict over the how
much a government should interfere in a society, says
Kennedy of CSIS. "China gives the state an enormous
degree of latitude and discretion and a right to intervene on
any question in any time. For the U.S., that right of
intervention is constrained with rights that members of
society have and external sources of accountability against
the state."
But at the same time, however, there isn’t as much
ideological distance between China and the U.S. as, for
example, the U.S. once had with the Soviet Union. China
has mostly embraced capitalism and many U.S. companies.
With a few exceptions, it has mostly participated in and
supported the international institutions created by the U.S.
and Europe.
And the U.S.-China relationship also brings substantial
benefits to the U.S., both economically and strategically.
China has supported the U.S. efforts on nuclear non-
proliferation in Iran and North Korea. The countries have
cooperated on counter-terrorism efforts in the Middle East
and Central Asia, and fighting pirates off the coast of Africa.
China assisted the U.S. with the Ebola outbreak in Africa.
The countries have forged new agreements on climate
change. China is an essential partner in this: China
uses almost as much coal as the rest of the world combined,
and it recently surpassed the U.S. as the world's largest
carbon emitter.
The economies are so tied through investment, debt,
business deals and trade that they may very well rise or
sink together. On the economic side, China is now investing
more money in the U.S. than the U.S. is in China. Given all
of these ties, it’s in the U.S. interest to work with China, at
least sometimes, as a close partner.
Big global issues and regional issues become “more
manageable when the U.S. and China actively cooperate or
at least work in parallel, and become less manageable and
far more dangerous if the U.S. and China do not cooperate,”
says Lieberthal of Brookings. “While the record is mixed, on
things like counter-terrorism, climate and global health
issues, the cooperation exceeds the competition.”
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