Moving from Nixon to global power

By Minxin Pei 斐敏欣

When then-US president Richard Nixon embarked on his historic trip to China 40 years ago, he could not have imagined what his gamble would unleash. The immediate diplomatic impact, of course, was to reshape Eurasia’s geopolitical balance and put the Soviet Union on the defensive. However, the long-term outcome of the US’ rapprochement with China became visible only recently, with the economic integration of the People’s Republic of China into the world economy.

Had Nixon not acted in 1972, China’s self-imposed isolation would have continued. Former Chinese paramount leader Deng Xiaoping’s (鄧小平) reform and opening of China to the world would have been far more difficult.

Four decades after the “Nixon shock,” no one disputes that China has benefited enormously. Today, the impoverished and autarchic country that Nixon visited is history. Global reintegration has turned China into an economic powerhouse. It is the world’s largest exporter in volume terms, and is the world’s second-largest economy. China’s presence is felt around the world, from mines in Africa to Apple stores in the US.

As we reflect on China’s remarkable progress since 1972, it is also an opportune time to consider how China continues to fall short in overcoming systemic obstacles to long-term success. Because China is widely regarded as a winner of globalization, it is natural to assume that the country has developed the means to meet its challenges. However, while China has implemented policies to maximize the benefits of free trade (undervaluing its currency, investing in infrastructure and luring foreign manufacturing to increase competitiveness), the country remains unprepared for deeper integration with the world.

One sign of this is China’s lack of the necessary institutions and rules. For example, China has become a significant player in providing economic development assistance (often tied to its strategy for acquiring natural resources). Its loans and grants to Africa have now surpassed those made by the World Bank. However, China has no specialized agency in charge of international development assistance. As a result, its foreign-aid programs are poorly coordinated and often seem counterproductive. Instead of earning goodwill, they are viewed as part of a sinister neocolonial plot to grab natural resources in poverty-stricken nations.

Another example is China’s lack of an immigration policy. Even though China is beginning to attract labor from around the world, it has yet to promulgate a comprehensive legal framework that would allow the country to compete for the most talented people or to deal with the complexities of international migration.

A third example is the absence of independent policy-research organizations. Owing to political control and inadequate professional development, government-run research institutions can seldom provide the high-quality, unbiased analysis of global issues on which sound policymaking depends.

Perhaps most importantly, two decades of rapid GDP growth have masked serious weaknesses on the economic front. Because China continues to favor state capitalism and discriminates against the private sector, it lacks strong private firms that can take on Western multinational giants. Except for Huawei, Lenovo and perhaps Haier (which is nominally collectively owned), there are no private Chinese firms with a global footprint.