Excerpts from part 2 of Li Lu’s series Discussion of Modernization:
A Look at the Future of Sino-US Relations
The paper traces the parallel histories of the land and nation known as the United States in the West and China in the East. An especially interesting thread was how Lu charts the shift from land to market economies. The backdrop and ensuing developments in the 20th century set the current stage and inform possible futures.
On America’s “Soft” Power
As the creator of the American Order, the United States has always retained the rights to make rules for the market, admit membership to access the market, and impose and lift sanctions on states that violate the rules. At the same time, it has borne most of the costs – military and economic – of safeguarding this global market. Rights and obligations together form the core of this American Order.
The United States has also established and promoted her set of ideological values, which we now know as her soft power. In Agrarian Civilization, imperial China established a political system structured around Legalism, and a belief system rooted in the values of Confucius and Mencius. This system of beliefs was intended to achieve the willing submission of its people through subtle cultural and spiritual influence. Similarly, the American ideology promotes freedom, democracy, human rights, constitutional government, the rule of law, free markets, free competition, free trade, and the sanctity of private property. These universal values are so powerful that they have been adopted by almost everyone in the world. It is the very combination of hard and soft power that has brought the United States such tremendous success.
On America’s “Hard” Power
America’s hard powers also include its global network of military bases, the sheer size of its economy, its huge domestic market, its open investment climate, its competitive tech sector, and its world-class universities. So, whenever a global financial crisis strikes, investors around the world will flock to the safe havens of the US Dollar and American assets. This remains true even after what happened in the 2008 crisis.
Whenever the US becomes less confident, it dispenses with the niceties of soft power, and unabashedly resorts to hard power. Those on the receiving end of American hard power are likely to conclude that while the US implements democracy at home, internationally it resorts to hegemony. As the creator of the American Order, its prerogatives include market access, market denial, and selective sanctions and penalties. These special privileges are constituent elements of American hard power.
Trump’s Lack of Subtlety In Wielding Power
The election of Trump has revealed the true nature of American hard power in the context of the American Order.
With China rising rapidly, areas of incompatibility between China and the US have become increasingly pronounced. In the global arena, China has presented a challenge to American dominance, and conflicts have arisen. On the economic stage, a China-led system of international institutions has been established and often without the participation of the United States. China has also pursued the militarization of the South China Sea. The US economy accounts for 25% of the global GDP, but it bears the lion’s share of military costs associated with the maintenance of the global market. From the American perspective, China’s share of global GDP is 15%, but her share of the cost is de minimis, making her a free rider. And to make matters worse, as bilateral frictions mount, the cost of maintaining the American Order has only gone up. To the US, China is becoming more and more like Russia.
One of US economic hard powers is the US Dollar as the default currency of global trade, finance, and settlement…This is why American sanctions are so effective, as evidenced by the developments following Trump’s announcement of America’s unilateral withdrawal from the Iran nuclear deal. ZTE and Huawei, two Chinese companies, have also fallen victim to American sanctions”.
4 Schools of Thought on China Policy
The four schools have always had divergent views. But in recent years, in light of all the developments in China, there has been a gradual convergence. Whatever the case may be, the reality of Sino-US relations is that today the American perception of China is approaching its perception of Russia.
American Order Focuses on Economic Power
The American Order is mainly preoccupied with the rules of access to and exit from the global market. It doesn’t wield much power over other nations’ political choices. The UN Charter states “the Organization is based on the principle of sovereign equality of all its Members”. So in fact, under the American Order, different political systems may develop, provided that they do not directly challenge America’s superpower status. The rapid growth of China’s share of global GDP (from less than 2% to 15%) is proof of this. Indeed, there is plenty of room for sustained growth.
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