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What’d you think when Reagan called you guys the evil empire?
It was a bluebird clear summer day in Moscow, 1990. I was studying there in what would turn out to be the last year of the Soviet Union’s existence, walking within sight of the Kremlin with a friend, an Azerbaijanian chemist. His answer stunned me.
I thought, someone is finally telling the truth, he said.
What?! I thought. The liberals in Washington, D.C. where I grew up were generally aghast when Reagan called the Soviet Union evil, labeling him a war monger. That day in Moscow I learned how different the same thing can look to different people.
Ahead of July 1 commemorations celebrating the Chinese Communist Party’s 100th anniversary, this is still true. Among foreigners, antipathy toward China has never been higher, based on Pew polling. On the other hand, inside China support for the Party appears high. Different people see things differently.
The chart below that my friends at Rose created succinctly shares one perspective. Over the last decades, compared to the US, in China you are less likely to be murdered and more likely to make money. Both relative to the experience of other countries and the volatility China itself experienced before this––Cultural Revolution, starvation, Mao’s cult of personality––the Party’s support makes sense.
For those of you who don’t know about the Cultural Revolution, I can’t recommend highly enough listening to both Part 1 and Part 2 of my interview with Gao Xiqing. His name may mean nothing to you, but in China he is a big deal and it is rare to get someone of his stature to describe what this experience was like.
Under Xi, China’s economic boom has been accompanied by increasingly bellicose foreign policy. Moreover, like many one-party states, contemporary China is marred by both corruption, according to polls by Transparency International, and weak rule of law, exemplified by President Xi obviating term limits.
Despite today’s obvious tension between China and the US over issues like Hong Kong and Taiwan, the two countries are more similar and linked than they were 50 or 100 years ago. In 1971, Mao was advocating Cultural Revolution while the US fought a deeply unpopular war in the mistaken belief that Vietnam’s politics would spread to Southeast Asia. One hundred years ago, the US economy was in the grips of the Great Depression and China a civil war.
Trade links are also substantial. The US exports tens of billions of dollars of airplanes, cars, soybeans and cotton to China and imports a lot of the things that are in your house or apartment—furniture, appliances and sports equipment. This does not show any sign of substantially shifting, absent specific sectors like cutting edge technology.
That gradual narrowing of differences is also evident in both the economy and economic policy. Both economies must deal with disruptive climate changes. Both economies are dependent on technology to boost future productivity and competitive capital markets to help fund this innovation.
Regarding policy, it used to be monetary and fiscal policy worked in tandem in China and independently in the US. Now that line in the US is increasingly blurred. In an example of the US moving toward China, the US is now mixing fiscal (spending) and monetary (printing) policy.
How things unfold from here is tightly tied to how well each region manages coming disruptive technological change. While the CCP has both unified China and led a massive economic boom, it did so in part by catching up on 150 years of under-investment. Now Chinese roads, airports and bridges look better, to my eye, than those where I live in New England.
Going forward, different challenges await. For each economy to prosper, millions of peoples’ jobs will be obliterated by technology. They will need to find new occupations, even as automation further narrows the gap between human and machine. To grow, economies must change, which creates instability.
It is the wreckage from this creative destruction process that in part led to the rise of Trumpism. A swath of the US population is frustrated enough that they are willing to overthrow the government. This reality in turn motivated the Biden Administration to undertake the most aggressive fiscal action since FDR, an effort to demonstrate to a country increasingly riven by an urban-rural divide that the government can solve problems.
The test for China’s leadership is also acute. As Chinese policy officials themselves have indicated, growth can no longer be fueled by infrastructure and debt. As the US and Europe have learned, confidence in the government is dependent on growth. The CCP will have to navigate this coming period of economic change by both rewarding disorderly technological innovation and at the same time maintaining strict control. Unlike with China’s catch-up period of growth, this time there is no template.
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There is no doubt that an America that supports the values of freedom, democracy, and equality is in a long-term dominant position, and China's leaders' assertion of "rising east and falling west" will be proven outrageous. The challenge for the United States is how to continue to consolidate the foundation of democracy, the guarantee of equality, otherwise the Trump in the United States will continue to erode and destroy. That will be a gloomy future. As to why China once fought side by side with the United States, advancing and retreating together, it is very simple, because they also need development to save their ruling base. Once they think "rising east and falling west," they will show a completely different attitude, as they are now.
12 years ago, during the GFC, two Treasury Secretaries came to China to ask the Chinese Government to perform a massive reflation to re-ignite the global economy. One of them even spoke Chinese. The Chinese Gov knew there would be long term negative consequences to the Chinese economy. Yet the Chinese complied. Inefficiencies were created, but the two countries cooperated to alleviate hardship. They joined hands to help the World. Why are we trying so hard to forget it?