As Chimerica dissolves, distrust deepens between China and the US
The atmosphere between Washington and Beijing has soured, with mutual recriminations rising over the South China Sea, trade and human rights.
All break-ups are tough. But the divorces we have learned to fear the most are protracted, conflict-prone and ultimately unresolved. All the signs are that China and America are in the middle of one of those messy divorces between abusive couples who hate and need one another at the same time. As Washington and Beijing prepare for new political leaderships, they cannot avoid a major renegotiation of the terms of their relationship.
Since the global financial crisis in 2008, we been living through the painful end of Chimerica – the period when the American and Chinese economies acted as one, in the process driving one of the longest periods of global growth and prosperity in history. This perfect symbiotic relationship – popularised by the historian Niall Ferguson – was based on China saving half of its GDP while America borrowed that money to finance a spending binge it could not afford. The romance ended in September 2008 with the collapse of Lehman Brothers. Now the terms of the separation risk awkward discomfort for the rest of the world.
On a recent visit to Beijing I was struck by the near-unanimous assumption that US demand will not return to pre-2008 levels. This has led to a lively debate about how to reorientate China’s economy for a post-Chimerican era. On the one hand, China is looking for non-western markets and hedging against the dollar by investing in companies and assets outside the US. On the other hand, Beijing is bracing itself for slower growth while looking for substitutes for its exports and fixed investment.
There is an ongoing discussion in China about how to encourage the growth of small and medium-sized enterprises, how to stimulate domestic consumption, and how to invest in social welfare rather than infrastructure. The economic debate in the US is less strategic, but there is a realisation that the level of debt incurred during the boom years is unsustainable and that some of the stimulus measures, such as quantitative easing, will make it increasingly unattractive for the Chinese government to stockpile treasury bills.
As if in anticipation of the “Great Decoupling”, the atmosphere between Washington and Beijing has soured, with mutual recriminations rising over the South China Sea, trade and human rights. A film released this summer in the US – Death by China, narrated by the nation’s favourite fictional president, Martin Sheen – says that “China is the only major power that is systematically preparing to kill Americans”. A publicity poster features a blood-soaked map of the United States stabbed by a huge knife engraved with the words “Made in China”. But the fear-mongering in the film is moderate compared to the daily attacks on “perfidious” American leaders on Sina Weibo (China’s answer to Twitter) or in bestselling books such as Unhappy China.
Tensions have increased because the post-American world has become a reality, driving both a weakened Washington and a strengthened Beijing to be more assertive. The hawkish Chinese academic Yan Xuetong claims that the world order is changing from “a unipolar system with the United States as its centre to a bipolar system with China occupying the other pole”. Military conflict is not the only danger. Both protracted competition or a peaceful condominium between the two powers could be almost as damaging for the world.
The competition is already on. China’s nervous neighbours have welcomed Washington’s renewed focus on the region. Collectively the democratic Asian powers, in alliance with the US, have more economic and military might than China (though their economies are utterly dependent on Beijing).
Andrew Small, an insightful China watcher, warns that “we could see a return of a lot of the negative dimensions of the cold war where attempts to solve global problems, solve regional conflicts or build international institutions are instrumentalised in a contest to change the balance of power between the two poles”.
The former US treasury official Fred Bergsten has long argued that, instead of competing, the two largest trading nations, at opposite ends of the world’s largest trade and financial imbalance, should form a legal condominium to run the global economy. Zbigniew Brzezinski extended this to the political realm by suggesting the creation of an “informal G2” to find solutions to the global financial crisis, climate change, nuclear proliferation and regional conflicts.
This has been shot down by observers such as Shi Yinhong, a Chinese academic who argues that China and the US bring out the worst in each other. “We lend too much money and the American government and people use this money to have an unhealthy mode of life,” Professor Shi says. The spectre of US power and the attraction of US markets have a mirror effect in Beijing, fuelling the most regressive aspects of the Chinese economic model and foreign policy. Thus, it is not hard to imagine the two worst polluters in the world – China and the US – colluding to stop a solution to global warming or undermining multilateral institutions.
The competition risks turning two great powers with a history of revolutionary universalism into nations obsessed with their own exceptionalism. Most importantly, the very idea of an international condominium dictating the global order runs against the spirit of a time when citizens and nations want to determine their own futures.
As Chimerica dissolves, each variant of the new Sino-US relationship appears unattractive. War would be catastrophic, strategic competition could paralyse global governance and a “G2” format could bring out the worst in the two largest powers. The only way of avoiding these dystopian futures is to encourage a multilateral order made up of more united regions, allowing China and America to build a normal relationship.
However, other powers such as the EU or Japan will not be taken seriously by either China or the US unless they solve their domestic woes and crank up their foreign policy capacity. If they don’t, they could find themselves trapped in a horrible custody battle between the two
Mark Leonard is the director and co-founder of the European Council on Foreign Relations and the author of “What Does China Think?” (Fourth Estate, £8.99). This column is published in association with Reuters