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Chinese Scholar: China Should Reflect on Its Overall Strategic Direction

{Editor’s Note: The United Morning Post, a Singapore news media, published an article that Yu Zhi authored. Yu is a Professor of Economics at the, Shanghai University of Finance and Economics. Yu argued that the series of economic actions that the U.S. recently took against China are a result of China’s competing for the world’s leadership. Thus he questioned whether China should reflect on its own overall strategic direction, including whether to challenge the Western countries at this time, whether to have a different economic model, and whether to push for the One Belt One Road initiative.

This may indicate that there are different thoughts in China regarding the trade war against the U.S.

The following is a translation of the article.} {1}

The U.S. trade war against China not only threatens the trade sector, but also extends to bilateral investment, intellectual property, and strategic industries (especially high-tech fields). It has also spread the fire to the issues of the South China Sea and Taiwan. It can be said to be a comprehensive attack against China.

In addition, the United States has united its allies so that they are taking concerted actions against China on many issues. Along with the United Kingdom, Australia, and Taiwan these actions include accusations against mainland China’s trade and the suppression of strategic enterprises such as ZTE and Huawei, as well as allegations the EU countries have made against China’s “One Belt and One Road” initiative.

Many people worry about whether the trade war between China and the United States and the entire Western world will morph into a full-scale confrontation or even a “new cold war.” The author believes that such worries are justified. China should not underestimate this possibility. Instead, it should reflect on the reason for the current situation as well as its overall strategic direction, so that it can avoid such an outcome.

As observers pointed out, the reason that the United States began a comprehensive suppression to contain China and that China and the United States are getting very close to a full-scale confrontation is that the United States believes that China’s strategic development in recent years is moving in the opposite direction of what the United States expects. This is reflected in the repeated public statements of both retired White House chief strategy adviser Bannon and the current White House trade adviser Navarro, as well as in the Kurt Campbell and Ely Ratner article published in the “Foreign Affairs” magazine in February. {2} Both are former senior U.S. diplomacy and national security officials.

Over the past 30 years, the United States and the West have actively encouraged China’s reform and opening up and supported China’s admission to the World Trade Organization (WTO), with the goal to push China, through economic integration, to strategically and gradually align with the developed countries. Some former U.S. leaders have optimistically believed that economic opening-up would promote China’s economic marketization and political opening-up and would ultimately lead China to follow a path that is similar to that of developed countries.

However, after joining the WTO, China’s behavior, especially the changes in recent years, has led the United States to feel strongly that it has overestimated its own ability to guide China’s strategic direction. Not only has China not changed in the direction the United States and the West expected, but China also has shown a trend of changing in the opposite direction: On the one hand, China has weakened the market mechanism in its economic system, strengthened the State’s role in industrial policies, and accumulated a trade surplus and a strategic industrial competitive advantage over the West. On the other hand, China has tightened its controls and its regulation of politics and speech, and has changed Deng Xiaoping’s diplomatic strategy of “hiding its capabilities and biding its time.” Instead, China has been vigorously promoting the “China model,” which is different from the Western model, and has pushed its “One Belt and One Road,” the Asian Investment Bank, the BRIC Bank, and other grand plans in direct competition with the United States and the West for the dominance of the future world.

This led to heightened vigilance on the part of Western countries, including the United States, which now believe the previous strategy to “guide” China has failed. They again treat China as a strategic adversary to be fully restricted and contained. This is not simply a dispute between countries over interests or leadership; rather, it is an issue of which direction (the China model vs. the U.S. model) the future world will follow.

First, is the positioning of China’s strategic development stage reasonable? In the past two years, China’s official media has publicized that China has gone from “getting rich” to “being powerful.” However, China’s current GDP has not yet caught up with the United States. Even if it catches up with the United States, China’s per capita income is only a quarter of that in the United States and there is still a big gap with other developed countries. Has China completed the task of “getting rich?” Has China passed Deng Xiaoping’s “preliminary stage of socialism?” Can China start competing with the United States and other Western countries head to head?

Second, is the setting of China’s strategic development goal reasonable? Is China’s strategic goal to establish a social model that is very different from that of the developed countries? Will the state-owned economy dominate China’s market and will the government control China’s industrial policy directly? Does China’s existing political system not need to reform? Domestically, China vigorously promotes “four self-confidences” (theory/road/institution/culture). Logically, since China is “confident” in all aspects, there is no need for reform. Is this what China really hopes for?

Third, is the adjustment of China’s diplomatic strategy reasonable? On the one hand, is it necessary for China to promote and implement the “China model”? What is the content of this model? Does “Chinese characteristics” refer to the characteristics of the political system? What is the source of China’s economic development achievements over the past 40 years? Is it the learning from the Western market’s economic system and increasing political freedom, or is it the adherence to China’s own “characteristics”? (This is the focus of the dispute between the leftists and rightists in China.) Does China have an internal consensus on this issue? If an internal consensus has not yet been reached and it has not yet been clearly understood, is it necessary to hurry in promoting externally? Will other countries accept it? Is it worthwhile to be so vigorous in promoting an unclear and uncertain “China model” that has resulted in developed countries wanting to contain China?

On the other hand, is it necessary for China to implement the “One Belt and One Road” and many other such international plans? There are still many domestic problems that China needs to solve. Why not put more funds into the domestic market and improve employment and livelihood? Some people say that the implementation of the “One Belt and One Road” is to transfer excess domestic production capacity. So why not cancel the industrial policy that has caused excess capacity and rely on market mechanisms to resolve excess capacity? Moreover, as Ms. Lagarde, Chairman of the International Monetary Fund (IMF), pointed out, investment risk is high in the countries along the “One Belt and One Road.” Once risk occurs, these countries will either be operating at a loss or divesting which will cause dissatisfaction from the countries in which China invested. This will lead to the outcome of “spending money to buy enemies.” Is it worthwhile to spend huge amounts of money to implement an international plan that is not appreciated and which has led to the developed countries wanting to contain China?

Fourth, does China need to change its propaganda and strengthen external communications, or implement substantial strategic adjustments? Recently, the official media in China have significantly lowered their tone of self-promotion in their internal and external propaganda. At the same time, China’s Ambassador to the United States, Cui Tiankai, conducted a speaking tour throughout the United States to explain that China has no intention of challenging the U.S. leadership and that the goal of the “One Belt and One Road” is peaceful development rather than “conspiracy.”

Nevertheless, the United States and the West will judge China’s strategic direction based on China’s actual behavior, rather than propaganda or explanation. If China does not make substantive adjustments, it may be difficult to eliminate the apprehension that the United States and the West have about China. Full-scale containment will continue for a long time. China and the United States and even developed countries will enter into an all-out confrontation. Even a “new cold war” is possible. China should be mentally prepared.

{1} United Morning Post (Singapore), “Yu Zhi: China Should Reflect on Its Own General Strategy,” May 31, 2018.
{2} Foreign Affairs: “The China Reckoning,” March/April 2018 Issue.