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Economics & Finance

How China is managing Western hostility

David Daokui Li |

After the global financial crisis, confidence levels in the United States and other Western economies plunged. Western hostility towards China’s economic and political power is rising, based on a lot of unanswered questions. A Tsinghua University professor writes from China’s perspective.

There are various concerns about China: Will China become another Japan? Is China working on social stability while achieving economic development? Will there be a Chinese Arab Spring? Will China dominate the world?

Only when China dispels these doubts and convinces the West that the 21st century will belong to China as much as any other country that works collaboratively for a stable global economy, will China develop a new pattern of modernisation and evolve into a powerful player on the world stage.

Confidence levels in the West decline

Nearly three years have passed since the global financial crisis, but its serious consequences are just been felt by Western economies now; as a result, confidence levels in the West have dropped significantly.

Both intellectual and political circles are in chaos. Most Western countries, excluding Germany, Canada and Australia, are caught up by a national credit crunch. U.S. federal debts have breached 100 percent of GDP, in Europe the figure is 80 percent, and in Japan close to 210 percent.

At this critical time a political leader who is good at promoting drastic reforms, like Margaret Thatcher or President Reagan is much needed; however, I believe that prior to the emergence of such a political leader, there is a need for a group of intellectual leaders with a strong mindset and a clear vision of the direction of reform.

However, the above is yet to arise. There is no cohesive thinker in the West able to propose a new social consensus and the course of reform.

Therefore, we can assume in the short term that Western countries will continue to struggle with the debt crisis and credit crunch. Consequently, the credit rating of the West will continue to be downgraded, and the population’s dissatisfaction with their governments will continue to increase as they doubt their political and economic systems. Levels of confidence will continue to drop.

The Western confidence crisis makes it difficult for Westerners to view China’s emergence objectively

China recognises that it is not in its interest to see Western economies falter.

As confidence levels in the West decline, Western economies are becoming more and more hostile towards China’s economic and political emergence. I recently participated in the “Munk Debate” held in Toronto, Canada on the topic “Be it resolved, the 21st century will belong to China”. The other three debaters were: the Former U.S. Secretary of State, Dr. Henry Kissinger; the host of CNN’s flagship programme, GPS, Mr. Fareed Zakaria, and Professor Niall Ferguson from Harvard University.

During the debate, three questions were raised about China:

Firstly, would Japan’s recent past be China’s near future?

China is enjoying strong economic growth, but will it encounter a sudden slowdown in 10 or 20 years’ time – imitating Japan in the 1980s? The answer is that there is an essential difference between China now and Japan then. People in China know that economic institutional change goes hand in hand with political institutional change. The Chinese people are not satisfied with the progress that has been made and are eager to push for more reform. In today’s China, I see energy and on-going change. While in Japan, I don’t think there has been any drive for change or any fundamental institutional improvement since the 1980s.

Secondly, is China simultaneously working on social stability while achieving economic development? Will there be a Chinese Arab Spring?

This is a very important social issue, and a major issue that China must face. Following the country’s economic success, people in China knew that there would be more demand for freedom of expression and increased participation in political decision-making. The majority of people in China are eager to push for more reform, both on social management and institutional changes through the power of the internet they are able to express their opinions on the various topics ranging from corruption, to tax reform, to urban management, etc. They are able to express their dissidence; and in most cases their voices are being heard.

Thirdly, should the West be afraid of Chinese colonial expansion?

While China is seeking to invest in different parts of the world, especially in Africa, there are fears as to whether this financial influence will expand to political and military arenas. Will China repeat the colonial behaviour of previous centuries? I think these doubts may persist and even intensify. Dispelling these doubts will require that Chinese business, government and intellectuals continue strong collaboration with African countries, both trying to mitigate risks and avoid conflicts. Without a doubt, colonialism doesn’t work and its cost would be huge.

Looking at some objective insights from the West, in the “Munk Debate” Dr. Kissinger stated that China will not dominate the world. Firstly, he believes that China will be preoccupied with enormous domestic problems. It has to reconcile a society in which the coastal regions are at the level of advanced countries while the interior regions are underdeveloped. Secondly, China is rising on a continent on which it has many, many competitors. In China’s geopolitical history, it has always been surrounded by a group of smaller countries, which individually were not a threat, but united could represent one. Therefore, it is extremely hard to imagine a world dominated by China, and the West should not be worrying about China’s emergence.

Three keywords on China’s emergence

The first keyword is “energy”.

China’s rapid growth over the past 30 years has led to this debate on “China’s century”. However, I would argue that the changes you have witnessed over the past decades are, at most, half complete. We are seeing continuous change in China. And why? – Because there is energy. There is fuel in our gas tank driving this continued economic and political change.

This energy came from a spectacular clash of civilisations between China and the West around 170 years ago. This clash represented a defeat for the Chinese and the resulting humiliation has been passed on from generation to generation.

The drive accumulated from this has generated an important reaction in Chinese society. People are eager to push for more reforms and more openness. Indeed, China will continue to reform and open up, which is in line with the remarks made by our great leader, Deng Xiaoping, on China’s development: “No Debate. Just Do it.”

Where is China headed? The second keyword is “revival”. Our aim is the revival of our great civilisation. We are not looking for retribution against the West and we are certainly not interested in dominating the world. Instead, we would like to see the revival of a peaceful, confident, open-minded civilisation similar to that of the Tang Dynasty.

The third keyword I would like to share is “influence”. China’s emergence has given hope to the poor of this world. They can now say, “China has been poor, if China can make it, surely we can”. Besides, China’s emergence gives us an alternative model for social and economic institutions, different from that of the U.S and other Western countries. A model where more weight is given to social welfare, well-being, and stability, rather than to pure individual liberties.

Allay Western fears

China’s economic and political emergence is still far from complete. China will continue to promote institutional change and push for more openness. To achieve this, China must communicate its intention to stay on friendly terms with the West and advocate collaborative international relations. With this approach China should hope to calm Western fears.


David Daokui Li is the Mansfield Freeman Chair Professor and head of the Department of Finance of the School of Economics and Management of Tsinghua University. He is also the director of Center for China in the World Economy (CCWE) at the School of Economics and Management of Tsinghua University. He is currently a member of the Monetary Policy Committee of the People’s Bank of China.

This article was translated from Chinese into English by Aileen Huang.

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