Chen Wenling: Building a constructive China-US partnership in the next 50 years, 100 years or longer

Abstract: On July 12, 2019, the US delegates attending the US-China Relations dialogue visited the China Center for International Economic Exchanges (CCIEE). Chen Wenling, the Chief Economist of CCIEE, and other CCIEE researchers participated in the meeting held for the US delegates. Many of the US guests served in the US government departments and hence have a smooth communication channel with the government and can influence the US policy formulation. Ms. Carla Hills, former US trade representative and Mr. Stephen Orlins, President of the National Committee on US-China Relations said in their speeches that despite the obstacles in the US-China relations, the two sides should push the bilateral relations forward rationally. The National Committee on US-China Relations is willing to work with Chinese scholars to find objective, practical and operational solutions to promote a stable US-China relationship. Chen Wenling said that US-China relations have now entered into a puzzle and everyone needs to think outside of the box and see the whole picture. There is a trust-crisis between China and the United States and to solve the crisis, the US needs to erase the four major misunderstandings about China, namely, “competition between the big powers and the emerging powers”, the “Thucydides trap”, the “transfer of hegemony”, and the “China threat theory”. The US and China should assess the situation from a long-term perspective, implement the consensus reached by the two heads of state on jointly promoting coordination, cooperation, and stabilizing the US-China relations, seek for more common interests, and promote the formation of an institutionalized and constructive partnership between China and the United States.

 Chen Wenling: I would like to welcome the US delegates and thank President Yao Yang of the National School of Development at Peking University for bringing them here. Some of the guests here are influential former politicians, experts and scholars. I met some of you at the China-US Economic and Trade Relations Seminar held in Hong Kong not long ago. The speech made by Professor Roach was impressive. The National Committee on United States-China Relations is a well-known think tank for studying the US-China relations and I know that the Committee played a key role in the establishment of diplomatic relations between China and the United States. Today we are very happy to have this seminar, welcome again!

Hills (former US trade representative): I would like to thank CCIEE for receiving us and appreciate Ms. Chen and her colleagues for organizing this meeting. We know that CCIEE is a very influential think tank in China and are very glad to have the opportunity to share my views on the China-US relations here. The National Committee on US-China Relations has been engaged in the US-China relations research for decades and has played an important role in this regard, including the early ping-pong diplomacy. Some of the US scholars here today used to work for the government and now are still studying the US-China relations. We can communicate openly and promote the development of the US-China relations. My colleagues also have some questions for you. Now I will give the floor to our Chairman, Mr. Stephen Orlins, who is also very familiar with you and have some questions for you.

Mr. Stephen Orlins (Chairman of the National Committee on US-China Relations): I am very glad that you were able to visit our office in New York during your visit to the United States, and we are glad to be here at CCIEE. In the past few days, we have been trying to find ways to improve the current US-China economic relationship. We are having a very difficult time right now. It seems that both sides have a stronger stance than before. Although Minister Mnuchin said that 90% of the problem has been solved, the remaining 10% is the most difficult one.

In some of my recent public speeches, I stressed several times that we need to tell the decision-maker the truth so that they can make better-informed decisions.

I believe that many of you have already seen a joint letter signed by Ambassador Hills, me and another 148 American scholars, in which we criticized the US government’s demonization of China and calling China an enemy. We also criticized the Chinese government in the letter.

So my question is, can we think outside of the box, see a bigger picture, and think about what we can do now and more importantly, in the future? What action should China and the US governments take to break the current deadlock?

Chen Wenling: Thank you very much, Mr. Orlins, Ambassador Hills, and our American friends! I have read the joint letter and I am very impressed with it. My colleagues and I will try to answer the questions raised by Mr. Orlins.

Dear Chairman Orlins and Ambassador Hills, the joint letter you and your colleagues wrote is widely circulated in China. Many people think that this voice is rational, objective and includes many constructive suggestions. As Chairman Orlins said just now, how can we break the deadlock for the current US-China relations? What can we do?

I believe that the US-China relations have now entered into a puzzle and we should jump out of it. The puzzle is actually set by the people and they put themselves into it. On the one hand, they fight with one another inside the puzzle; on the other hand, they feel that the fighting is not worth it.

In order to correctly understand the relationship between China and the United States and get out of our own puzzle, we need to erase the following major misunderstandings.

The United States is now the most developed country in the world and China is the largest developing country with the fastest development. Moreover, the United States is now the world’s largest economy, and China is the second-largest economy. Therefore, the two countries can’t fight like children and they should keep their promises. If they keep fighting with each other, this will have a serious negative effect not just on China and the United States, but also the rest of the world.

In the US-China trade war, the trade surplus deficit is still a technical issue and a small part of the US-China relationship. Replacing the problem at the strategic level with technical problems, not seeing the big picture and trying to solve the problem with a short-sighted approach will sacrifice the common strategic interest in the future.

I think that China and the United States need to solve the crisis of trust. Because of distrust, they have been unable to listen to each other, which led to strategic misjudgments, strategic shifts, and irrational actions and policies. We must clarify the following four misunderstandings to resolve the crisis of trust.

The first big misunderstanding is that many people define the US-China relationship as a competition between an existing big country and an emerging big country, which is not true. China has a history of more than 5,000 years but the United States has a history of 250 years only, therefore, China should be defined as the existing big country and the US is the emerging power. In only 250 years, the US, the “emerging power” has surpassed all the countries in the world and become the most powerful country, which should be a valuable wealth in human history.

As a historical big country, China learned from the economic systems of the United States and other countries to establish a market economic system in the 70 years after the founding of the People’s Republic of China, especially the 40 years of reform and opening-up. It has also established diplomatic relations with the United States 40 years ago. 40 years’ reform and opening-up has made China’s rapid development and today’s achievements possible. Moreover, history will continue to be rewritten.

The United States developed a successful path in the past, but it has now many problems in relation to national governance, such as social contradictions, bipartisan contradictions, rich and poor contradictions, ethnic contradictions, and alienation of democracy. These problems have given other countries a chance to re-think their development paths. China did not simply copy the US model but drew experience from it and created a development path according to China’s actual situation. The result is that 1.4 billion Chinese people are no longer live in poverty and the Chinese economy has developed rapidly. Thus, China’s experience is also worth learning. In the development of history, every country will continue to develop, innovate, and make continuous progress.

The relationship between the US and China should not be summarized as a competition between an existing big country and an emerging power. The ultimate goal of every country is to keep up with the historical trend, come up with a better political system, economic system, and bring benefits to the people.

Both the United States and China have room for improvement. China needs continuous reform, which is why President Xi Jinping said that reform is always on the road. I believe that the United States also needs changes to solve its profound contradictions and problems.

The second misunderstanding is about the “Thucydides trap”, which is actually a pseudo-proposition. Many American scholars believe that the two major countries, China and the United States will fall into the “Thucydides trap” and there is a zero-sum game between them. A very well-known American scholar has even written a book called “Destined for War: Can America and China Escape Thucydides’s Trap?”. I think the “Thucydides trap” is a Pseudo-proposition. More than two thousand years ago, the world was still in the era of slavery and countries were fighting for territory and hegemony, therefore, it is inappropriate to compare the current US-China relationship with the relationship between big countries at that time.

The world at that time was unrelated and there was no close economic connection between various countries except for the exchange of goods. However, the economy in today’s world is highly blended and the next generation of information technology, modern information technology, the Internet, the Internet of Things, the high-speed rail network, the highway network, the port network, and the aviation network are all inextricably linked. The global industrial layout, industrial chain, supply chain, service chain, and the value chain have actually cemented the world into one. Only through cooperation and interconnection can the world reduce the cost of administration and world economic development, and achieve greater development.

The third misunderstanding is the theory of “hegemony transfer”. Many experts in the field of diplomacy, including those who study the US-China issues, claiming that the hegemony is shifting from the US to China. They believe that China will take the hegemony away from the US after it becomes a powerful country. The Chinese leaders and government have solemnly promised that China will never seek hegemony, no matter how strong China will be. Despite that, the United States and some countries are still worried about China because they are accustomed to the cold war mentality. They see China’s peaceful rise as the transfer of hegemony, this is so wrong.

The fourth misunderstanding is the “China threat theory”. Although the “China collapse theory” is over, the “China threat theory” is being used to prevent China from peacefully engaging with other countries. According to the World Bank and the International Monetary Fund in 2014, China ranked first in terms of purchasing power parity standards. However, China’s economic strength, technological strength, and military strength are still behind that of the United States. China’s total GDP ranks second, but it ranks only 72nd if assessed based on GDP per capita. Within China, there is also a big gap between the eastern and western regions, and Northern and southern regions, implying that China still has a lot of works to do, which are more important than fighting for the first or second place of the world.

I believe that China has always been more or less passive when dealing with the United States. During the trade war with the US, China has always made a lot of concessions and compromises. By doing so, China hopes to build a constructive partnership with the US. Therefore, the “China threat theory” is a big misunderstanding.

In the past decades, there have been two theories about China, one is “China threat theory” and the other is the “Chinese collapse theory”. The “China collapse theory” is over but the “China threat theory” has become a more serious misunderstanding. Many Chinese scholars also said that when the GDP of one country accounts for about two-thirds of the US, direct competition between the US and this country will occur and the US will suppress this country. I think that these misunderstandings have led to the crisis of trust between the US and China.

In the future, it is necessary to build a stable and constructive US-China partnership. If the United States can re-direct its strategy for China, the trade negotiations will move forward in a positive way.

President Orlins has asked what should we do in the future? Here is my answer.

We should go beyond the current mystery and build sound US-China relations for the next 50 years, 100 years or even longer. The presidents of China and the United States have defined the bilateral relationship as coordination, cooperation and stability. I think that in the future, we should build an institutionalized and constructive partnership, which will not be affected by the change of leaders in the US and China. This kind of US-China relations will not only solve the current problems in trade, but also ensure a long-term friendship and benefit the rest of the world.

The US needs to re-direct its strategy in three aspects. Firstly, the US should stop treating China as a strategic opponent. Secondly, the US should shift its domestic public opinion and correct the biased social consensus. Finally, the US should correct the previous public voice based on the Cold War mentality.

China and the US should focus on the following four aspects.

First of all, the role played by China and the United States in world economic growth is irreplaceable. If the two countries cooperate, they will bring great momentum and positive spillover effects on the world economy, which can not be replaced by any other countries. The population and trade of the two countries account for 25% of the global total; their total GDP and manufacturing output account for 40% of the world’s total; their currencies account for 52% of the IMF special drawing right; the innovation outcome of the two countries account for 60% of the world’s total, the development of AI and unicorn enterprises of the two countries account for 80% of the world ’s total. As can be seen, China and the US will play an enormous role in promoting world economic development if they can cooperate and complement each other.

Secondly, having considered the world status and influence of the US and China, they will also play a significant role in global governance and order if the two countries cooperate rather than confront each other. Both China and the United States are permanent members of the United Nations, and members of the G20 and APEC. They are very influential on the world stage and therefore, I believe that the US-China cooperation will bring more stability to the word.

As President Xi Jinping said in the G20, cooperation is better than friction, and dialogue is better than confrontation. If China and the United States can push the decision-maker to achieve a strategic turn, not to treat each other as a strategic competitor or rival, stop suppression and containment, but to promote cooperation, they will be able to find more common interests.

Thirdly, we should clarify the misunderstanding of certain issues, which is one of the important reasons for the impeded trade negotiations.

1. About the US-China trade negotiations. 11 rounds of negotiations have been held so far and the 12th round will start after the G20. We hope that there will not be another 12 rounds later. We hope to stabilize the US-China economic and trade relations as soon as possible, make them predictable and make sure that this bilateral relationship will not affect the investors from China, the US and other countries. Moreover, the industrial chain, supply chain, service chain and value chain of the two countries and the world should not be affected negatively. The US Secretary of Treasury, Mnuchin said that China and the United States reached a consensus on 90% of the issues but I think the remaining 10% are the most difficult issues. The United States also has to make some commitments and solve some problems. China will solve the problems concerning the United States according to the general trend of economic globalization and the reform and opening-up of China.

Recently, President Trump said that the US can resume the supply to Huawei, but Huawei has still not been removed from the entities list of the US Department of Commerce, which means this problem has not been solved substantially. However, the problems that the United States hopes China to solve are no longer problems due to China’s effort.

2. In relation to intellectual property protection. After decades of effort, China has established a complete intellectual property protection system. I hope to hear from you that what are the problems in intellectual property rights that China needs to solve in the future.

3. In terms of the reform of China’s state-owned enterprises. China has been pushing SOEs reform in the past 40 years of reform and opening-up. The ownership of China’s SOEs has made great progress in terms of diversification, marketization, socialization and internationalization. Please let us know if you think that there are still problems need to be solved in reforming China’s SOEs.

4. The so-called forced technology transfer is a pseudo-proposition. China does not have such laws and regulations allowing Chinese companies to force US companies to transfer their technology. However, some American firms claimed that forced technology transfer exists in their business operations. In order to solve this problem completely, China has officially promulgated the Foreign Investment Law in March 2019 during the two sessions of this year, which includes more than a dozen of “prohibition”, and one of the most laws is “no forced technology transfer”. In the past trade negotiations, the US asked China to write “no forced technology transfer” into the law, and now China has turned it into law. If the US thinks that there are still some other problems need to be solved, please tell us explicitly, instead of criticizing China without specific reasons. I read the section 301 investigation issued by the United States. The report describes many problems but it uses many vague expressions such as “basically”, “supposed”, “estimated”, which means that the US has no solid evidence.

Cui Tiankai, Chinese ambassador to the United States, also said in a speech in the United States that he hopes that American friends could tell him who exactly forced American companies to transfer their technology to Chinese companies, who steal intellectual property right from the US? The US should not impose sanctions against China based on a vague concept.

5. Regarding market access, the Chinese government has also made a great effort. The negative list of the free trade zone has been reduced from the initial 190 items to 40 and further progress will be made in this regard. We should learn from the United States. For example, we could just write national security on the list, rather than come up with so many items.

6. Business environment. According to the business environment report issued by the World Bank last year, China’s business environment ranked 46th, while the United States has one of the best business environments. China needs to make a lot of improvements to catch up with the US. In recent years, the Chinese government has done a lot of work to relax the market access and improve administration efficiency.

7. Data flow and network regulation. My view on this question only represents my personal view but no one else. I think that cyberspace needs to be managed by all the countries together, we can call it global co-governance. We should establish rules for global data flow to avoid chaos in cyberspace because the chaos in cyberspace will be more harmful to humans than chaos in reality. I think that China and the United States should work together to promote a frameworks for global cyberspace governance. This is not only the demand of the United States, but also China and the rest of the world.

The opening-up of the Internet and the flow of data are the trends of the future. China is a big country and has 1.4 billion people, thus, any kind of chaos in public opinion and on the internet will cause a great impact on the people and bring problems to its stable economic development.

I think that the concern of the Chinese government is not whether or not to open up the internet or regulate data flow, but how to ensure smooth global data flow and use the cyberspace to promote economic and social development. The question is not about to open up the internet or not, but how to establish effective rules and framework for global cyberspace.

As you can see, the governance of the real economy in the real world is still a mess and a global consensus can hardly be reached. Any kind of chaos in the cyberspace will bring disaster to human beings. So, how can we promote the opening of cyberspace while ensuring the security and orderliness of data flow have become the key issue.

Fourth, the trade war has continued for less than two years, but the impact it brought to the world, including the United States, will last for many years. The US has made a lot of demands and China has already started to take action, so long as these demands do not cross China’s bottom of the line. Personally, I think that we have learnt the following from the trade war.

First, both China and the US have suffered from the trade war. The depressing economic data of the United States in April and May is directly related to the trade war. Second, high-tariff is not a good weapon. It is almost impossible to solve the trade problem with high tariff. Third, trade war violates economic and trade laws. These traditional practices will not help anyone to win in the contemporary information society. Fourth, the pressure exerted by the US on China will not work. The US has cut supply to Huawei, ZTE, and other Chinese high-tech enterprises, this will only make China a stronger country because China will make innovation the most important national strategy. When China’s innovation reaches the same level as the United States, or even surpass the US, American companies will lose the Chinese market completely, which will be an unimaginable loss for the United States.

Dear Ambassador Hills, President Orlins and friends from the US, thank you very much for listening to my talk.

Hills: Thank you very much for the speech. We agree with President Xi Jinping that dialogue is better than confrontation. You may know that the National Committee on US-China Relations is a non-profit organization dedicated to helping the US-China relations. It was our efforts to get Chinese table tennis players to the United States and broke the diplomatic deadlock many years ago. I also agree with you that both the United States and China have their problems. Although we are no longer work in the government, we still have some influence on the government and we will use that influence to improve the US-China relations.