Tag Archives: China-U.S.

China and America: The Usual Head-To-Heads Or Something New?

One whose judgment we trust took us to task for assuming that the escalation of tensions between China and the U.S. embodied in the row over yuan revaluation, and now President Barak Obama’s call for the release of the new Nobel peace laureate, was a temporary creation of election season.

The counter argument goes like this: After three decades of economic reform and opening to the world, China has been transformed by its economic growth. That has made Beijing more self-confident when it comes to its role in matters of global economics, trade and security. With that has come self-assertiveness, be it not always skillfully deployed. What has not come from those 30 years is China turning into anything that looks like a democratic Western country, or even a variant of the modern-day former Soviet Union or any of its old Communist Eastern European satellites. Nor has it joined the club of the international community, for want of a better phrase, playing the international game by the established rules and respecting international norms.

That was what many Washington policymakers had expected China’s rise to be accompanied by; instead it has become a self-centric rival that expects to rewrite the international rules for its own ends (not that self-interest is ever far from any nation). Thus, our critic argued, as this interpretation gains currency in Washington, the China-engagers there are losing ground to the China critics, and that that is a fundamental change, not a transitory shift prompted by the U.S. mid-term elections next month. The upshot of this change will be a consistently sharper confrontational tone to the bilateral relationship: to see this already happening, witness how Beijing has handled issues such as North Korea, the trawler dispute with Japan, territorial claims in the South China Sea and Iran, let alone trade and the currency issues.

Like Keynes, we would like to think that our opinions change when the facts change. We remain unconvinced that the facts have changed that much, at least yet, though we are open to the notion that they may be slowly starting to. We certainly acknowledge that there is a rivalry between China and the U.S. and that Beijing is systematically testing the boundaries of its new-found power. But we don’t think it would have pushed the U.S. in the way it pushed, say, Japan over the recent fishing trawler incident. The relationship with the U.S. is its most important bilateral one and the two countries are economically so intertwined that both have more to loose than to gain from it breaking down. China’s leaders have repeatedly shown themselves ready to go to the brink before backing down if it appears they risk doing themselves harm, but they will continue to give themselves a large margin of error when it comes to brinkmanship with the U.S.

There is also the unchanged if often overlooked fact that there are two not one election seasons in play. As China approaches a leadership transition in 2012, the nationalists, who see the economy as an instrument of national security, and the economic reformers, who see a more open economy as the only way to ensure the long-term growth that will underpin the Party’s continued legitimacy to rule, are jostling for position. Both the diplomatic and military aspects of China’a foreign policy often reflect domestic politics, so the recent more self-assertive strain in its foreign policy, we believe, reflects the current balance of the internal leadership succession battle.

So we still expect to see episodic confrontation between Beijing and Washington on specific issues over the next couple of years, probably recurring more frequently and some of it quite sharp, but we don’t expect it to degenerate into anything much worse.

That has to be set against a longer-term context. Economies are growing larger, more complex and more divorced from domestic political constituencies thanks to globalization, technology change and sharpening competition that are dissolving and reforming the borders of business and societies faster and more chaotically than politics and political institutions can keep up with. Tomorrow’s global powers will look different from today’s, more shared leadership in some areas, more competitive in others, just as modern management theory tells us that tomorrow’s corporate  leaders will have to be less controlling and more willing to share authority and decision making. Perhaps what we are starting to see in the China-U.S. relationship is the first outlines of that, uncomfortable as the thought may be for both sets of incumbent political leaders.

Are we right, are we wrong? Let us know your thoughts.

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Olympic Gold Medals: Its All About The Economics

The Games are over. Beijing and the rest of China now faces the inevitable post-party hangover.

It was certainly quite a show both on and off the track. China got its craved for position atop the gold medals table, but the U.S. won the most medals overall, so both countries can claim to be No. 1 as they return to their more usual bilateral fare — trade, product safety, yuan revaluation, market access, human rights, &c.

Yet for all Project 119 on the one side, and Michael Phelps and the Redeem Team on the other, medal counts all come down to economics: “Statistical modeling shows that population size and income per head provide an almost faultless method for identifying medal totals”, writes U.K. academic Stefan Szymanski in “The Market for Olympic Gold Medals” (free abstract here). U.S. academics Gary Becker and Richard Posner summarize the arguments in “Determinants of the Olympic Success of Different Countries“. There is a good summary of the literature on the subject at Economic Logic. And an ingenious way of looking at the same factors through the opposite end of the telescope at YouCalc’s Real Olympic Medal Count.

So it makes sense that China’s increasing medal tally over the past four Olympics follows its growing wealth, while the U.S. is in relative decline. Its 11% share of all medals is its smallest going all the way back to 1952 when it won 17% of the medals.

Szymanski tells Forbes that he expects China’s medal total will drop at the next Olympics, because that it what always happens to host nations the Olympics after. Greece’s 26 medals in Athens as followed by just 4 in Beijing. He also makes an interesting point about how globalization is spreading not just wealth but also Olympic medals. A record 81 different countries won medals in Beijing. As Mihir Bose at the BBC notes, three won medals for the first time in Beijing, and three more won their first individual medals.

Even if you pretend you can keep the politics out of the Games, you can’t keep the economics away.

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Chasing Gold

Following the gold medal table at the Beijing Games is rather like watching a middle distance race in which the front runner has taken a big early lead, but in which his main rival is now chasing him down. Can he hold on for victory? Or will he be pipped at the tape?

China’s lead in the gold medal tally is substantial, but that is because, swimming apart, the early schedule favored its better sports. But the United States is starting to cut back the lead now the track and field events, or the athletics, depending on whose English you speak, are underway.

The prize, of course, is more than mere sporting bragging rights, but we don’t need to rehearse the geopolitical rivalry discussions here.

Those who follow such things tell this Bystander that the U.S. is likely to end up with 45-47 golds and China with 44-46 come Sunday’s final event (boxing). That’s a photo finish in prospect. Liu Xiang’s hamstring, the U.S. 4x100m relay team’s butterfingers or some other disaster or triumph yet to come could be the difference.

Could it even be a dead heat?

Update: Final tally: China 51 golds; U.S. 36. So much for the form experts. Remind me never to back their racing tips.

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Hard to take an immediate read of the impact on Sino-American relations of the arrest of four people in the U.S. for spying for China. U.S. officials have long said that the Chinese government has been making intense efforts to steal U.S. government and industrial secrets. A steady flow of Chinese-related espionage cases has been made public by the U.S. government in recent years, keeping the issue in the public eye. Reuters has a list here.

These latest two cases seem to be more of the same. In the first, Dongfan “Greg” Chung, a China-born engineer who used to be employed by Boeing and is a naturalized U.S, citizen, was held on suspicion of having stolen trade secrets, including information on the Space Shuttle, the C-17 military transport plane and the Delta-IV rocket, which he is alleged to have sold to China.

In the second case, Tai Shen Kuo and Yu Xin Kang, residents of New Orleans, and Gregg William Bergersen of Alexandria, Virginia, a weapons system policy analyst for a U.S. government agency that manages missile sales to foreign governments, were arrested for passing secret U.S. defense documents to China.

Both sets of arrests were announced by the U.S. government on Monday. Any assessment of how much substantive damage was done to U.S. national security, if any, will have to await court hearings. For now, the China-bashers have a spoon with which to bang on their cages.

No apparent reaction from China yet. Last November, China hits back at a U.S. congressional panel report, calling its claims of trade manipulation and high-tech espionage by Beijing “insulting” and “misleading.” Not that Beijing will want a day in court to prove the point. Just expect some diplomatic tit-for-tat retaliation.

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