Interdependency Theory (2)

China, India, and the West

By Simon Tay

WESTERN RULES

Edward Steinfeld’s book Playing Our Game: Why China’s Rise Doesn’t Threaten the West offers a different perspective on China’s rise. The changes in China’s economic and political systems are not contradictory, Steinfeld argues, but are more or less in sync. This, he argues, is because of “institutional outsourcing” from the global system: globalization brings with it commercial discipline and requires states to institute rules in order to foster change and anchor progress.

Having been influenced by foreign investors and experts, the Chinese government and business community have deliberately altered China’s commercial environment, especially with regard to legal institutions and industrial-labor relations. For example, in 2007, the National People’s Congress enacted a labor contract law that provides individual workers with far more job security than they had under the preexisting laws, which dated back to 1994. China remains a far cry from having the sort of labor unions and collective bargaining that are taken for granted elsewhere, but, as Steinfeld correctly argues, Chinese labor practices are moving away from their revolutionary roots and are increasingly consonant with Western standards.

Meanwhile, argues Steinfeld, the role of the Communist Party within China’s political system has changed radically in recent decades. Today, politics are primarily determined not by contests for power between the party and different segments of society but by partnerships between government forces and reform elements outside the party. Ordinary Chinese people, Steinfeld argues, have gone from being mere subjects to being citizens. Because of this, the Chinese government has to proceed cautiously: to preserve the party’s central role, officials must find allies outside the party, including among activists and civil-society elements, that could otherwise threaten the party’s monopoly on official power. To Steinfeld, this means that China is evolving in much the same way that other modernizing nations did, including not just South Korea and Taiwan but also the United Kingdom and the United States. Increasingly liberal politics are ahead, he argues, even if the Communist Party will remain central and there will be ebbs and flows along the way.

“China today is growing not by writing its own rules. . . . It is playing our game,” Steinfeld writes. That game is globalization, and its dominant rules are set predominately by the West. If this is correct, China will increasingly become a responsible stakeholder in the existing global order. The country, then, does not need to be contained; globalization will take care of that.

Such analysis may breed complacency. First, China may not follow established rules. Beijing has had high-profile difficulties with Google over the past months, and the CEO of General Electric, Jeffrey Immelt, recently commented that although his company had ramped up investments in China, he was not sure that Chinese officials “want any of us to win or any of us to be successful.” Furthermore, established rules might be unable to accommodate some of the unprecedented issues raised by Chinese growth. Take monetary policy: What China has done in accumulating massive financial reserves is similar to what other Asian states did during their development, but those states had far smaller economies. China’s accumulation of reserves might threaten the crisis-plagued global financial system, especially given the complex matter of whether Beijing sets policy based on political reasons as much as economic ones.

The state’s decisive role in the Chinese economy allowed it to respond bluntly and effectively to the recent global financial crisis. But, as the financier George Soros and others have rightly warned, there are substantial dangers that China’s brand of state capitalism may give too little regard to the market and to humanistic values. Steinfeld regards such concerns as throwbacks to a past era, before China began acting as an authoritarian liberalizer in the mold of other East Asian states. He argues, for example, that the attempt of the China National Offshore Oil Corporation to purchase U.S.-based Unocal in 2005 — which some critics in the United States argued was motivated by a strategic effort to secure Chinese access to energy — was merely a corporate decision aimed at modernizing a major business. CNOOC, he points out, was publicly listed in Hong Kong and had been working with Western consultants to achieve global scale and standing.

These insights are useful, but perceptions matter, and many U.S. policymakers viewed CNOOC’s actions as a case of Chinese leaders using corporate cover for their pursuit of national security goals. This is one reason why China’s rise continues to trigger suspicion in Asia, the United States, and elsewhere.

THE INDISPENSABLE NATION

Many Americans are concerned that in a “post-American world,” as the Newsweek editor Fareed Zakaria put it, a rising Asia and a worried and weary United States will ignore each other or interact acrimoniously. But, as Steinfeld argues, Asia’s fate is tied by globalization to the West.

Before the economic crisis, there seemed a reasonable case to be made that Asia could decouple from the West — that increased economic integration among Asian states could keep the region growing even if U.S. consumers stopped buying Asian goods. As the crisis mounted in 2008, however, it became clear that Asia and the West are not decoupling: when U.S. demand fell sharply, it immediately hurt production across Asia, especially in China.

But some efforts are already under way to limit Asian economies’ reliance on U.S. markets by increasing Asian states’ own domestic consumption and developing new financial mechanisms to keep Asian savings in Asia and away from the U.S. Treasury. For example, under the recently enacted Chiang Mai Initiative, Asian governments (including the members of ASEAN, plus China, Japan, and South Korea) pledged over $120 billion for currency swaps aimed at ensuring currency stability across the continent. And as of this year, ASEAN and China are united in a free-trade zone that is the world’s largest combined market, with over 1.8 billion people. (In addition, various bilateral trade agreements have crisscrossed Asia for years.)

Steinfeld’s book explains why even such reforms separate Asian economies from Western ones only marginally. As China has captured the central role in global production networks, Steinfeld points out, its economic growth has unleashed great innovative capacity in U.S. companies. To be sure, the economic crisis has made some U.S. actors, such as labor unions, increasingly critical of globalization, but major U.S. companies have long recognized that trade and investment in Asia are essential to their ability to innovate and stay ahead.

There are many additional factors outside the scope of Steinfeld’s book that also demonstrate the interdependence of Asia and the West — especially in terms of regional security. The United States remains essential to a range of issues in the region, including the stability of the Korean Peninsula and the Taiwan Strait, disputes over control of the South China Sea and over human rights in countries such as Myanmar (also known as Burma), and the future of Afghanistan and Pakistan. Asia currently has no local substitute for U.S. influence, and indeed, old and unsettled Asian rivalries could reignite if any one power tried to assert itself too forcefully. The rise of Asia is far from a truly continental affair; the region is not united. Policymakers in Washington and across Asia, therefore, should continue to welcome strong U.S. influence in the region.

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