My Boss On Why West Shouldn't Fear China

It may be a peculiarity of those of us from Eastern cultures that we like the idea of having a boss. Whereas Westerners often disdain being told "do this, do that," we actually like the idea of being answerable to someone who can make things happen for you--if you play your part in the grand scheme of things.

And speaking of the grand scheme of things, you do not need to look far to see how activity in the global political economy is shifting to Asia. I have written in great length about how the British government is cutting the bejesus out of university funding. Being smarter than your average social science establishment, the LSE has long started to look East. Not only do we want to attract Asian students (who pay full, not subsidized tuition) and funding from regional institutions, but we also want to secure long-lasting relationships with political heavyweights in Asia. Not only do Chinese diplomats come to exchange ideas with us at LSE IDEAS, but the current Minister of Foreign Affairs, Yang Jiechi, is an LSE alum.

Hence, we have hosted the LSE Asia Forum since 2005. Today, many LSE bigwigs including my boss Arne Westad have gathered in Beijing to converse with our Chinese counterparts like Yang Jiechi. The other names should be familiar as it's another veritable who's who of business, politics, and academia: Dr Henk Bekedam, Sir Howard Davies, Professor Julian Le Grand, Deputy PBoC Governor Hu Xiaolian, Professor Hu Yonghua, Professor Wang Jisi, Liu He, Liu Mingkang, Morgan Stanley Asia Chairman Stephen Roach, Lord Stern, Professor Michael Yahuda, HRH Duke of York, and Zhu Min.

What follows below are Arne Westad's thoughts on why a more preponderant China will not look much different from today's world. Being a historian by training, he is particularly keen on how China's political and security considerations colour economic ones. Interesting stuff:

China's rise to prominence in international affairs is the big story of the past two decades. After all, how China behaves as a Great Power will determine what the global political system will look like for generations to come. Some fear China's ascendancy, both in Asia and globally, will lead to instability as it seeks to replace the United States as the dominant power. However, China's behaviour does not suggest it wants that role, and its current policies – both in terms of economics and foreign affairs – may not be able to sustain it.

On the face of it China's economy seems to faring the financial crisis quite well. It has tried to use its rather peculiar economic system to insulate itself from the effects of the crisis. Having a currency that is not fully convertible may have helped as it did during the 1997 – 1998 crisis and it has also benefitted from high degree of state intervention.

At the core of the Chinese response to the crisis is a package, unveiled in 2008, intended to stimulate domestic consumer demand through a series of measures that may have taken up to 14 – 15 per cent of China's GDP. However, Chinese consumers have proved reluctant to spend when they lack confidence in demand for China's exports, and thus in their own job prospects

Indeed there are signs that the government is shifting away from domestic stimuli and towards an export-led way out of the crisis, which of course is what drove Chinese growth during the good times. This policy assumes that the demand for Chinese goods overseas will return towards the end of 2010. This is a very risky strategy. Rather than driving the recovery process, China may be making itself dependent on recovery else where.

In terms of international affairs more broadly, if China is to be a dominant power in its region, it will have to build a solid and stable relationship with Japan – still the world's third largest economy. Some policy makers in Beijing realise this, and are trying to move beyond past grievances to economic and political cooperation. So far their efforts have been stymied by a growth in popular nationalism and a lack of daring initiatives both in Beijing and Tokyo.

China also faces a difficult situation on the Korean peninsula. There is an increasing sense that the North Korean state will collapse rather than going through any kind of transition. For now China has been trying to improve its relationship with South Korea while improving its contacts with the United States on Korean matters. What it does not want is a German style reunification that brings US troops all the way to the Chinese border.

In Mongolia and Central Asia, China has not translated trade into political influence. This may not matter much now while the region still looks to Russia, but over time the Chinese leadership may come to regret not doing more to ensure its influence there.

The big success story over the last few years has been China's increasing involvement with ASEAN in terms of trade and political consultation. But so far ASEAN has been in the driving seat. The Chinese leadership does not seem to understand that the trend within ASEAN is towards more integration, cooperation, and political consultation. If China continues to emphasise bilateral ties with the countries of ASEAN rather than regional issues, it risks getting left out.

The other major issue for China, is of course, Taiwan. Recent years have seen very positive contacts between the two sides, but true normalisation will take a long time. As the recent announcement of US arms sales illustrates, even the most cooperative government in Taipei has two main priorities that over shadow its relations with Beijing: security, and the relationship with the US that underpins security.

So does China have a grand strategy for a new world order? The answer, so far, is no. While westerners cannot imagine that a transition from a US to a Chinese dominated world will not also mean a transition to a very different world system, China does not actually have a qualitatively new system to offer. A severe regional crisis might lead Chinese leaders to think differently but China's development needs and the structures of its economy mean that even when it becomes a global power, it will want to operate in a system not too dissimilar from the one that exists today.

Amerocentric commentators (or a huge portion the blogosphere) who have neither been to China nor have interacted with its people are fond of bashing and belittling the PRC in the usual White Man's Burden-ish fashion. So, it's good to get a more informed and nuanced perspective from those with a keen sense of history and horizons broader than their computer screens.