Sunday, November 8, 2015

Grasp the reality of China’s rise | Larry Summers

Grasp the reality of China’s rise | Larry Summers
November 8, 2015
For the first time in centuries, China affects the global economy as much as it is affected by the global economy. In the years ahead, China is likely to account for between one-third and one-half of growth in global incomes, trade and commodity demand, and its significance will only increase as its share of the world economy rises.
I returned last week from a trip to China with the dispiriting conclusion that the world lacks shared understandings regarding goals for the evolution of the Chinese economy, the objectives of China policy in the short and medium terms, and the institutional structures needed to manage both cooperation and inevitable tensions. Chinese President Xi Jinping has rightly called for a “new type of great-power relations .” But it must be embedded in, if not a new international economic architecture, then a substantially revised and updated one.
The first issue on which clarity is required is whether it is the objective of the United States and the global community to see China succeed economically as a support for global prosperity and a driver of positive social and political change, or whether it is our objective to contain and weaken China economically so that it has less capacity to mount global threats. This is seen in Beijing as a live question and is in fact a matter of debate beyond the shrill rhetoric of protectionists and politicians. The Council on Foreign Relations, hardly a source of xenophobic or radical ideas, recently issued a report drafted by leading U.S. diplomats condemning this country’s efforts to build up China within the international economic order and calling for a “balancing strategy” that includes “new preferential trading arrangements . . . that consciously exclude China.” No small part of the case being made by the Obama administration for the Trans-Pacific Partnership (TPP) trade deal involves the idea that it will promote competitiveness vis-a-vis China and reduce China’s influence in determining global trade rules.
The world cannot expect economic cooperation from Beijing if its objective is to inhibit Chinese economic performance. As Xi’s rapturous recent receptionin London illustrates, the United States may isolate itself from traditional allies if it does not cooperate economically with China. If Chinese economic performance deteriorates substantially, as is certainly possible, there is a risk that a balancing strategy will invite a hostile nationalist reaction. None of this is to say the United States does not have valid concerns about China’s behavior in the economic arena or to deny that these should be addressed vigorously. It is to say that our objective must continue to be mutual growth and prosperity.
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