CCG Dialogue with Harvard Professor Anthony SaichCCG | April 30 , 2021
China-US relations have entered a new stage of uncertainty and the future direction of this relationship is a topic of hot debate.
On April 30, the Center for China and Globalization (CCG) co-hosted the China-US Relations Forum with Harvard University’s China Social and Economic Symposium, joined by Harvard Professor Anthony Saich and CCG President Dr. Wang Huiyao. During this virtual dialogue, the two scholars discussed competition and cooperation between China and the United States in fields such as geopolitics, technology, economics, culture, the pandemic and climate, taking the pulse of China-US relations under the new Biden administration.
Prof. Anthony Saich is the faculty chair of the China Program at Harvard Kennedy School and the director of the Ash Center for Democratic Governance and Innovation and Daewoo Professor of International Affairs, teaching courses with a focus on China. Prof. Saich first visited China as a student in 1976 and continues to visit each year. As a leading sinologist, prof. Saich also advises a wide range of government, private, and nonprofit organizations on work in China and elsewhere in Asia. Dr. Wang is founder and president of Center for China and Globalization (CCG) and a professor and dean of the Institute of Development at Southwestern University of Finance and Economics in China. He was a Senior Fellow at Harvard Kennedy School and co-authored The Path of Public Management Elite at Harvard, a book on Harvard’s public managementeducation. The Dialogue was moderated by HKS Mason Fellow Tian Ye.
This virtual program is part of CCG’s “China and the World” webinar series seeking to engage global thought leaders on topics concerning the current situation, dilemmas of globalization, and China’s role in the world.
“An all-out confrontation in the sense of a Cold War is really impossible.”
Tian Ye: Hello everyone, good morning, good afternoon, good evening. Thank you for joining us today. My name is Tian Ye. I’m aMason Fellow here at Harvard Kennedy School. It’s my honor to moderate the US-China relations panel discussion, which is also the closing session of the China Social and Economic Symposium organized by China Society at Harvard Kennedy School. So today, we are very fortunate to have 2 top scholars in this field to analyze the trend of China-US relations and discuss the competition and cooperation between 2 countries in the domain of diplomacy, geopolitics, economy, technology and climate change. Now allow me to briefly introduce our 2 distinguished panelists. First, professor Anthony Saich is a Daewoo Professor of International Affairs in Harvard and the director of the Center for Democratic Governance and Innovation. Professor Saich teaches courses on comparative political institutions, democratic governance and traditional economies with a focus on China. Welcome, professor Saich.
Anthony Saich: Thank you.
Tian Ye: We then have Dr. Wang Huiyao, the founder and president of Center for China and Globalization (CCG). Dr. Wang is also a counselor to the China State Council, a vice chairman of Association of Economic Cooperation under the Ministry of Commerce and director of Chinese people’s Institute of Foreign Affairs as well as a vice chair of China Public Relations Association. Dr. Wang had been a senior fellow at Harvard Kennedy School. Welcome Dr. Wang.
Wang Huiyao: Thank you.
Tian Ye: OK, before we start, a quick announcement to the audience – throughout the panel discussion, please feel free to put your questions in the webinar Q&A box. My colleagues and I are monitoring the questions and I will raise to the panelist at the right time.
OK, now let’s get started. So, talking about the China-US relations, it’s probably fair to say that the relationship has reached an all-time low since the two countries re-established diplomatic relations in 1979. It seems that confrontation now outweighs cooperation on many fronts. In 2019, in his speech at the US Council on Foreign Relations, FBI Director Christopher Wray labeled China as whole-of-society threats, and he called on the United States to respond with a whole-of-society approach. So, professor Saich and Dr. Wang, do you think this is a sign of a potential Cold War? And what are your views on the development of China-US diplomacy in the future?
Anthony Saich: Well, I don’t think it would be a Cold War in the sense of the United States experienced with the former Soviet Union. And I think the Biden administration wants to act in a way that does see China as a strategic competitor but finds ways to prevent that sliding into a Cold War. The quite simple reason being while people might talk about is confronting on an all-round way. The two societies and economies are intertwined and embedded in very deep ways, if one looks at the financial sector, if one looks at trade, if one looks at investment. That really means that an all-out confrontation in the sense of a Cold War is impossible.
And remember even at the height of the Cold War with the Soviet Union, Washington and Moscow still found ways to cooperate in important areas and global challenges. And I think that is one area that we should always keep in mind as we think about this relationship as bad as it is at the current time. There are pending global challenges, which really need cooperation between countries like China, United States and indeed others to resolve problems and challenges around global public goods.
So yes, the relationship is very confrontational at the moment. But I think one has to accept the reality from Washington’s point of view, that China exists, it’s not going away anytime soon. And that neither actions in Washington are not gonna change domestic behavior in China and neither are actions from Beijing are gonna change domestic behavior in the United States. And with that as a basis, I think we have to build platforms about where is it legitimate to have competition? What are the areas of conflict, many of those of course around territorial issues, but how do you build guardrails to stop those sliding into a dangerous area and where might one look for competition?
Wang Huiyao: Thanks, Alvin. , I agree with what the professor Saich just said. And it was really not a coincidence that professor Saich actually shared quite a few similar views – I had dialogues with Graham Allison, with Joseph Nye and now Tony, all very famous Harvard professors.All of them actually don’t think the cold war is a better analogy for Sino-US relations. For example, Allison said it’s impossible to have a cold war, it’s not really an acceptance for the contemporary world, which is so internationally intertwined, particularly China and the US. I talked with Joseph Nye just 2 nights ago and he really thinks that Cold War was not the right way to put it. Because now this is different with the Soviet Union era or cold war era so that we shouldn’t really push for that because we are already Interconnected, Graham Allison even said, we are like linked twins, we can’t survive without each other.
Tony is a famous professor. I’ve known Tony for over many years. He has really great done great contribution to the Sino-US relations and exchanges and also for the Sino-US training cooperation activities, he’s the pioneer for the high-level officials trainings. So, he knows China well. I agree, this is not really a best way to describe it. I noticed Biden’s speech on 100 days, which he gave just recently to the US Congress that he does not seek confrontation.
Can we make it into some kind of Olympic spirit that we can have healthy peaceful competition, really, we should seek more collaboration, so the Climate Summit that just happened last week was a good example, leaders sat down to discuss issues virtually, that’s a good way to go into the future. I’m glad that Harvard professors have this kind of consensus as well, no cold war.Thank you.
Anthony Saich: I think on that way, I agree that there has to be competition. That doesn’t mean there’s not enough space for both countries to develop. Without going into detail, it’s quite clear that we have different values. There are many things that Americans find objectionable about Chinese practices. And of course, there’re many things in Beijing that people find problematic with American behavior and those things being made very clear. I think the one thing that China has realized better than America is that future competition is about geoeconomics rather than, saying a Cold War, which also included very strong military components. Now that’s not to say that in the potential for military challenges, but I think where China has been moving ahead and Washington’s been slow to catch up on is with its outbound projects with the belt and road. That is gaining traction in the economy. And I think one of the challenges for America is that you begin to see an emerging Asia, an economic Asia which increasingly has China at the core, because of its trade and investment, where America has been left somewhat behind. But do you still have the remnants and the strength, in fact of the security in Asia, which still has America at the core. We still have a very strong band of alliances that China really doesn’t possess. While the previous administration, maybe let those alliances wilt, I think it’s clear that the Biden administration sees part of its strategy as reviving those alliances. My hope would be that it wouldn’t just be reviving it as a military alliance, but it would also extend to better economic development in corporation.
Wang Huiyao: Great, that’s right. That’s exactly we should work on then, China is actually seeking economic collaborations with the region. For example, RCEPwas signed last November and now it’s trying to join the CPTPP. ASEAN is already becoming largest trading partner with China. Of course, geopolitically, as you said, they still probably more relied on in the US on the balance as well. So, I would really hope that as time goes on, and ASEAN – Asia Pacific really becomes a bigger market and China can be a major contributor. Maybe we can stabilize the situation and we are playing less political, even for the Quad. Maybe we could make it more economic rather than a strategic or military base. I think you’re right.
Anthony Saich: Yeah, I do think that it was a major error for the United States to disengage from the TPP process. Because it would have kept the United States with a strong role in the Asia region. I can see the logic, I can see the arguments why and it’s also debatable whether the Biden administration would go back into that particular agreement, given that Hillary Clinton also ran against it in 2016. But, as you sort of begin to suggest, it does set a challenge for many of those countries in Asia. And my sense is, pre-pandemic, traveling in the region, the most those countries did not want to be put in a position where they had to choose between China or the United States, or at least, they did not want to be pushed to choose publicly to make a choice. And those pressures are not going away at the present time.
Wang Huiyao: We really need US and China to work together with the pandemic. You’re absolutely right.
The long-term Asia-Pacific strategies of both the US and China are uncertain
Tian Ye: Talking about Asia-based Corporation, one central question about the long-term strategy competition between US and China is, which country has more influenced in the Pacific region? So, since President Obama proposed “a Pivot to Asia” strategy. The conflict between China and the US in this region have intensified like day by day. Professor Saich and Dr. Wang, what’s the nature of these conflicts in your opinion? Is it possible for China and US to achieve their respective strategy goals in this region under kind of peaceful conditions in the future?
Wang Huiyao: I think that China in the last several decades has been growing quite rapidly, particularly economically. For example, ASEAN has already become the largest trading partner for China. And even for India, there were a lot of Chinese companies doing business there. Xiaomi was in India which in 3 or 4 years had become the largest mobile phone provider for the India market. So, I see enormous potential for Economic Cooperation. I think that China does suffer disadvantage is that China’s neighboring 14 countries. And US basically has a geographically very friendly neighbor, Canada, and Mexico on the other side. That is not really as complicated as China. But I think China is still doing OK, trying to have this “1+10” “10+3” cooperation . China is seeking cooperation with ASEAN with free trade, it’s also talking with Japan and Korea for free trade as well – the FTA. I think what has happened in the last few years, is driving by this negative sentiment dominated by the US, picking on China quite negatively. Of course, China’s public also respond sometimes very strongly to that as well. So, there’s caused some concerns for neighboring countries.
But I think in the long-run, China is always a peaceful country, China never colonizes any place. One hundred years before Columbus discovered America, Zheng He has led 7 times expeditions as far as to Africa or South Asia but never stayed there. In Chinese philosophy and culture heritage, China is always a peaceful, neutral middle-ground kind of country. So, I think in the future, this will continue. I do think that if US makes the Quad a kind of a strategic alliance against China or even NATO of Indo Pacific, that probably is really trying to make a self-fulfilling prophecy. So probably we should be more rational on those approaches. I think on the whole China is also seeking to work with all the other countries, including its neighbors, China is in a good position. Countries want to sort things among themselves without foreign interference.
Anthony Saich: I think Obama was more of a pirouette rather than a pivot. It didn’t really sort of fully turn to Asia. I think, though, to understand Washington’s perspectives, I agree with Huiyao that China has not taken other areas or other countries over militarily, it hasn’t had that kind of colonial expansionism.
But certainly, from Washington and I think it’s important to understand it so we can disagree or agree. They have seen more aggressive approaches from China, particularly over the last 8 or 9 years and I think from Washington perspective, what really began to solidify this shift in view was back in 2012, when China decided to occupy the Scarborough Shoals, which of course Is also claimed by the Philippines, and conducted to build up there and even though China had signed on to the Law of the Sea, it rejected those findings. And I think that gave an impression in Washington that China was beginning to engage in more aggressive actions in the maritime areas, I think it also created concerns among some of the Southeast Asian nations about China’s intentions, so I agree with much of Huiyao said. I think if you look at it from Washington perspective. It looks a little different. And then of course, we know there’s very significant differences about Beijing’s actions in recent years in Hong Kong, are they abiding by agreements that were made back in the 90s? And of course. What is seen is more intimidating behavior towards Taiwan. So again, it depends on where you sit the way you see these things and I think for the US, it gives a different picture. And one can understand what it’s called the Wolf Warrior Diplomacy, the more aggressive defensive Chinese actions – it doesn’t play well globally, for the most part. And I think if you look at a lot of opinion polls in different countries, again that is created concern and, in some cases, declining popularity and I think it’s something that China is going to have to adjust over time. China now is a global power, and it has to behave like a global power. And so, behavior that appears could be taken to be seen as threatening will not go down too well. You know, falling back on the 100 years of humiliation, yes, that’s true but is that what you want to hear from a major global power moving forward? So, I do think both capitals need to adjust their rhetoric and behavior.
A new narrative is needed for China both nationally and internationally
Wang Huiyao: Yeah, I think so. The one of the disadvantages China has is that 90% of the international major media outlets that all are in English, which are influential and also America also plays predominantly on those narratives and the so China is still has a lot catching up to do in terms of trying to explain yourself better and of course, also to let people see what will come out eventually. You know even for the neighboring countries, China hasn’t really caused any major conflict for recent history. So, I think that people may speculate and, but the problem is that US has been sending their aircraft and fleet frequently to the South China Sea and Taiwan very often, so that is really where I think China also felt has been threatened as well. China hasn’t sent any people to the Caribbean or conduct military exercise in those regions. So, I do agree both countries and both capitals need a lot of dialogue and communication to better sort out their misunderstanding and then really let people in the region to sort them out as well.
Anthony Saich: Yeah, I agree, I think it depends on where you sit and the way you see it and obviously Washington interprets those things differently. But if I was sitting in Beijing and if I looked out and looked around, I would think this gets pretty close to containment in terms of alliances that are being built around me. But just one comment on the media. It’s true. Yes, of course, much are English.
I think one of the things that the propaganda authorities in Beijing needs is kind of get to grip with is the kind of language and the kinds of approaches, which might go down well in China don’t go down so well in the English-speaking communities. And that appears is more of a kind of threatening language, which turns people off. Now, it may play well in the domestic nationalist sentiment, but I don’t think it plays very well internationally.
Wang Huiyao: With both domestic message and international message, I think we need a new narrative, absolutely. But on the other hand, it is also true the Western media sometimes had a long ideological bias on China. So, it’s not a short-term ting but I think we can improve on that.
China’s economic growth has been spectacular, yet the next stage remains debatable
Wang Huiyao: And Tony, I read your report of July 2020, a great paper you published – “Understanding CCP Resilience, Surveying Chinese Public Opinion Through Time”, in which you constantly monitored China’s public sentiments from 2003. The ideological differences are partly because China always had somewhat high authorities for 5,000 years, it is always a centralized country. Those big irrigation projects in this big country geographically, needs a strong authority, and now let alone governing 1.4 billion people, which is the largest population in the world. By now, the CPC, has lifted 800 million people out of property, and has been doing well on all the infrastructure transformation, and also anti–corruption measure and other things.
So, I think that your survey has well documented all those changes and the general mass acceptance of CPC. CPC earned their legitimacy, by constantly responding to the economic needs of the society, which is great. So maybe I think what we need now is how we can really have a better message and have a better understanding of the world rather than this kind of, as you said, Wolf Warrior behavior going on.
Anthony Saich: I think there’s a couple of things that I think are worth saying. One thing that the surveys found which unfortunately were not allowed to conduct anymore is that contrary to what many people outside of China thought, the groups whose satisfaction has increased most were the poorer rural and the poor urban communities in those communities, in the hinterland of China rather than the Eastern area of China. Now that’s not to say that satisfaction didn’t Increase in the East, or with richer populations. But what it says to me is that the leadership in Beijing have understood that they had a problem with those who have not benefited so well from reforms in the past and really, since Hu Jintao and Wen Jiabao, the investments in social infrastructure have actually been popular with many Chinese citizens, whether it’s the restoration of the medical insurance scheme, whether it’s the expansion of “Dibao” or other activities. That does seem to enhance satisfaction. So, in a way that kind of dismisses one of the ideas that is been around that maybe there’s a social volcano of discontent related to developments in China.
But I do think, as I said earlier, really, Beijing’s behavior is going to be decided by what happens in China. And I don’t think anyone can doubt that the economic growth has been spectacular. People coming out of poverty has been extraordinary. I think we can argue what really led to that – was it state activity? Was it simply letting Chinese entrepreneurial habits come to the fore?
But the real challenges are, can China get to the next step of its development? It is really extraordinary. One can be critical about a whole range of things and people are and I am as well. But you also have to acknowledge that some of that progress has been extraordinary and unexpected. But the real challenge is now that lies ahead is getting from being sort of upper-middle income to a real high–income country.
I think it’s quite considerable that some of the institutions, which served China well in the past may not so effective moving forward. And I think this again is something that’s ignored in Washington, where it tends to be, if you like a straight-line projection – if Chinese developed in this way, it’ll keep developing. How do we deal with that and what might the threat be coming from that? Personally, I think China is going to be much more absorbed over the next 5 to 10 years dealing with these domestic challenges, which is also going to limit its capacity to extend its power externally. And some people already raised the question – is China in a phase of overreach, has it tried too much too quickly globally? I actually have some sympathy for that view.
Wang Huiyao: Thank you Tony. Well, I really admire that you’ve been conducting this survey and research since 2003 which is one of the few in-depth field studies on this area of China, with other professors, too. Very impressive, not to mention that you frequently visit China, and you were in charge of Harvard’s Chinese officals‘ training program.
So, if these days, if people come to China, they realize it’s incredible now. Even people living in China are a bit surprised that China has 1 .4 billion people covered with basic Medicare and 1 billion people with some basic Social Security package as well. And, of course, China practices 9-year compulsory education and there are 1 billion smart-phone users. So, I think the livelihood of the people really has gone up enormously and so that only attributes to government efforts and of course, with the market reform.
So, I would always say China is a hybrid. The market has 60% private enterprises and then you have another 115% which are multinationals and another 115% are SOEs. That probably provide the right balance to push the economy and also there’re bigger government coordination with a 5–year plan after another 5–year plan. Now I see what President Biden is doing in the US now basically is a little bit bigger government now, more intervention and more coordination, too. So, you’re right on your observation of this phenomenon in China – I think that’s where there’s a lack of studies in the West so I really hope there will be more professors and academics like you would conduct more this kind of research on China, which I think also China can learn a lot from, of course.
China still has a lot of challenges, I agree with you – how can we sustain this kind of growth? Amost 60% of China’s energy consumption came from coal in 2030, how we can reach carbon peak and neutrality by 2060 is a huge challenge. China’s population growth is declining as well, and aging is also increasing. So there’s a variety of challenges that China is facing. So, it is not a liner curve, maybe, but we really have to find a way to move forward. There could be synergies, though, with such advanced technology. With high-speed trains and everybody having a smart phone, efficiency has been greatly improving and the communication cost is almost zero. So, I would say that we have a stable international environment, and we don’t want to jeopardize that, and China is still trying to keep growing with its signature 5-year plan and also the next China 2035 for the mid-term objective as well.
There should be more academic and cultural collaboration between the two countries
Anthony Saich: Collaborative research, I think, is important for enhancing understanding and also progress. I mean Harvard has had for 25 or 30 years very good collaboration, precisely around questions of air pollution, climate and so forth, which is progressed significantly over that period of time with colleagues through Tsinghua and I do hope that those kinds of collaborations are able to continue.
It’s getting much more difficult, to be honest though, in the areas that I work in if you’re trying to do field research or in the Social Sciences. It’s much more difficult to do research in China that it was a few years ago. That, I can see why perhaps Chinese authorities don’t want foreigner’s kind of mucking around in those areas, but it also entails a backlash. It also entails less hospitable and less favorable views of China amongst academics because of that process.
It also occurred to me, another thing as you were talking about, Huiyao, politicians tend to go to Beijing, Shanghai, Shenzhen, for example, Guangzhou. Maybe if I only went to those cities. I would come back terrified about China’s development. I mean Is just staggering.
But if I started going to rural Guangxi, I started going to rural Yunnan, I started maybe going to some of the mountains in Sichuan, I’d come back with a different perspective of China. I think of China, going back to what I talked about earlier, that China’s domestic challenges are complex and are going to entail considerable attention from the Chinese leadership and is not that the whole of China is now full of glittering skyscrapers like Shanghai or Shenzhen. And I think it would help foreigners get a more sophisticated and perhaps more all-round perspective of what China has done and the challenges that still face China moving forward.
Wang Huiyao: I agree. I think that absolutely, we need more international academic and student exchanges, and we need more people like you to conduct more studies in China. I was also quite disappointed with the recent few years that there seems a freeze on the exchanges on academics and also the number of American students in China is dropping and also that of the tourists to China is dropping too, not even to the level of the time of Beijing Olympic 12 years ago. So, I really hope now with China’s infrastructure, we could really make it more friendly for our international visitors and also international academics and students’ exchanges. Everybody will come back from China with a different view and a complete picture of China rather than not having been to China. So, it’s important that we maintain dialogue and maintain this openness. And I hope that university programs could be kept open keep it open and we should keep the visa open with multiple entries for both countries and we should let the people come back freely. So, after the pandemic, relaxing this situation soon would be great. I’m glad to hear that by August 1st, US universities now are starting to accept international student to come in. I hope the same thing will happen to China as well, I really hope so.
Tian Ye: Among the diplomatic relations between the two countries, we’ve noticed that a very interesting change that might happen. It has been reported by Wall Street Journal that Professor Burns at the Harvard Kennedy School might be appointed as the new US Ambassador to China. Ambassador Burns is well-known for being a tough negotiator, and also a strong advocate for China suppression by actively calling for alliances with countries including Japan, Australia and the European Union. So, he would be very different from the previous ambassadors to China in terms of background and expertise. So, the question is, if Professor Burns is officially appointed, what kind of impact will it have on the diplomatic relations between the two countries?
Anthony Saich: Of course, I have no idea whether he will be appointed so I can’t speak from that perspective. I think one of the things you have to remember about Nick is that he’s a long-term-career diplomat. When he came to Harvard Kennedy School, I think he was the highest-ranking person within the State Department who was not a political employee. So that means he’s well gifted in the craft of diplomacy. He knows how to approach, he knows how to argue. When you’re an ambassador, though, you’re not going to behave differently than your government is telling you to behave. Now, you might try and, sort of, get more realistic messages back to that government, so Nick Burns is not going to behave in a way which is out-of-step with the Biden Administration.
I do know, though, Nick has strong experience of working with China on certain issues, around Iran, and also on the question of the Korean Peninsula and the six party talks. And he’s often commented on those six parties talks that China actually played a very constructive role. So, I don’t think it shuts out the possibility for kind of creative dialogues. But he knows the diplomatic scene well; he knows many of those other countries in Asia, as well as China. I’m sure he’s gonna draw on those connections to promote what the Biden administration sees as being in the best interest of the United States. So, I wouldn’t see that him being appointed as ambassador, should be so, will lead to any significant difference from where the Biden administration has taken its approach, which we talked about earlier.
Wang Huiyao: Yeah, I do see President Biden actually appoint a lot of more competent and professional, seasoned staff. Also, he’s a really emphasized a lot on balance, gender equality, and he’s picking experienced diplomats, or ex-officials. When it comes to the Nick case, I think that working in the government, and working in Harvard, the top university in the world, which has a long tradition of those exchanges with China and has many Chinese students study there means that he probably is well aware of all those issues, challenges and opportunities.
Well, let’s hope that this is not a rumor. But definitely I’m sure we need a strong and capable US Ambassador, to really create some right channels, bridges and communications back to the US as we hope that Sino-US relations can be stabilized.
Anthony Saich: Yeah, I think what Huiyao said at the end there is the most important. What you want from your ambassador is someone who can pick up the phone and talk to the president if there is an important issue, or if there’s information to be fed back. Now, I don’t know whether Mr. Burns has that capability, but I do know he has worked closely with President Biden and with think tanks, and groups thinking about foreign policy. So, he clearly has a deep connectivity to those who are now working in the administration on East Asian affairs, for example. But as I said at the beginning, I have zero idea about whether he will, or will not be appointed, but I just want to reemphasize the point I made that whoever gets there, you want someone who can pick up the phone and talk to the president, directly.
Trade tariffs on China have not been beneficial to either the US or China
Tian Ye: Yes, thank you both. As a student in Professor Burns’ class, I do respect him and his expertise. I wish him great success if he gets appointed, and I really hope he can bring his diplomatic wisdom to China to restore the US-China relationship.
Now, let’s move to the economic side. The China-US trade war that began in 2018 has already caused tremendous damage to both countries. So, the question is, under the Biden administration, will the economic decoupling between the two countries be eased, or will it be the opposite? Will there be even more fierce conflicts over the economic issues, like tariffs, exchange rate debate, and also like the argument around state-owned enterprises, IP issues? You have a long list of those issues. So, like, Professor Saich and Dr. Wang, what’s your view on that?
Anthony Saich: I mean, first, on the trade war, it’s clear in statements that have been made that they’re not going to lift yet the tariffs, which was imposed by the Trump Administration. Personally, I find that a little bizarre because there is no real evidence that shows they’ve been beneficial to the US economy, and perhaps have been even detrimental to the US economy. So why do you want to keep in place of policy which is actually detrimental to your own country? I don’t really understand that. I do understand it in a political sense, that the Biden administration does not want to be seen as being weak. And they would be attacked, I think, if they lifted those tariffs.
There are two very important points about the trade, though. The first is the idea that it’s somehow a zero-sum game is of course, nonsense. And secondly, related to that, if you look at the trade deficit, it doesn’t reflect the true situation of the economic interaction between the countries. Many many years ago, Larry (Lawrence) Lau, the economist, calculated what he called “the value added” into trade. And if you calculate that in, the trade deficit drops by between a third and a half and let me give you one example. Producing Apple iPhone, something like that – 3.4% of that value stays with China. Yet it sells at $240. So, $240 gets booked in the trade figures, but that’s not real. I mean, that’s not the reality of what China is actually taking from that. It also ignores the fact that US companies sell over $200 billion worth of goods in China. So, this is a much more complex picture than is being painted, and someone really needs to get a hold and grip of this. And trade, China has been more dependent on exports to America than the other way around, although US exports have increased significantly. There are a couple of areas for the US consumer which could be problematic: 80-90% laptops in America come from China, similar with iPhones. So, it needs to be looked at really carefully. The bigger question of decoupling again goes back to some of the points Huiyao, and I have raised before. There is such an inter-linkage that complete decoupling is impossible, which is not to say that it won’t increase in certain areas.
Also, remember it wasn’t President Trump than necessarily started decoupling. You know, China banned Facebook, it banned Google, it banned Twitter, for example. That’s a pretty clear example of decoupling. So, you know, there’s faults there on both sides, and I think it depends on where you look. I think trade will decrease, and I think China is looking for other markets, so it’s not so over-dependent, not necessarily just on the US, but also on the European Union. But if we take the financial sector, for example, that’s $5 trillion worth of business. And China really needs access to global financial markets so it’s very heavily in China’s interest to stay engaged in that sphere, and I think Beijing is being quite clever in indicating to Wall Street that it’s going to be willing to make it easier for financial institutions to operate in China, possibly driving a wedge between Wall Street and Washington. So, financial decoupling is much more difficult to imagine. FDI, I think from both sides is again probably going to decline. You know, most Chinese investment, FDI, into the US today, has not really been strategic. It’s been one-off, it’s been trophy projects, which is very different from US investment into China, which is part of the global production and supply chains, a much more strategic aspect. But I think, because of things have their own levels in the playing field and maybe in the US business community sense, China’s own policy, made in China 2025, is probably going to reduce those levels, and similarly, Washington’s actions to restrict Chinese investment in collaborations in certain areas is, also, going to put up barriers to Chinese investment. So, it’s not going to decouple completely, but I think in certain areas we will see shifts. But like a lot of what we’ve talked about in this discussion today. Yes, competition in some areas, but some areas it’s just mutually beneficial, and that will continue.
Wang Huiyao: Yeah, I agree with what Tony just said. I think that decoupling is not really the option. We’re living in the 21st century, I mean, since opening-up, there’s are about 50, 000 US companies that set up operations in China, generating $700 billion revenues. As Tony rightly said, you know there’s Apple made in China. So, in the international market there’s a global value chain, in which China has played a platform role, in making the design, or providing value-added chips. So, the fear of decoupling is causing the international shortage of chips now because everybody is worried about a future tech war. Now, a lot of automakers are stopping manufacturing because they don’t have the chips anymore. That’s really absurd. It’s also going to damage hugely the US business. I mean, after all, look at GM, Ford or even all those European automakers, they sell more cars in China then their own countries and China is Apple’s second largest market. So, I do think that this kind of decoupling cannot really sustain.
Now China is continuing to open up. China set up 21 free trade zones, and the highlight being the largest financial sector, China has completely opened up. And also, although President Biden still talks about China’s technology, IPR protection, China now applies more patents than US companies now, and the largest pending applications come from China. Chinese companies had the same desire, not even less than other international and US companies. So, I think things can be really addressed. China wants to join CPTPP now, which is designed by the US for higher-standard IPR and also SOE reforms, and environment and also of course data flow and labor rights. So, you see, China is not afraid of changes, and China wants to do that, not to mention WTO reform, too. So, I really hope that we come back to this kind of platform and talk, and negotiate, and then set up good examples for the rest of the world because I think the trade has really benefitted all countries. As Tony also said on trade, as I read one of your articles, that the trade from US to China, since China joined WTO, has gone up 500%. That’s five times, and China’s GDP has gone up 10 times since China joined WTO. It’s good for both countries, and for the world. So, I really hope that we will follow economic rationality and move from, put aside those geopolitical issues, which I think will damage both countries in the long run.
Anthony Saich: I think one of my colleagues, Bill (William) Overholt, I think has made a very valid point. From our perspective, from the US, there’s many things we can be critical of, of China’s behavior. But we should be critical of the right things, not the wrong things and I think what is happening at the moment is everything’s getting piled in as if everything is wrong. As you correctly said, Huiyao, and again this is a point Bill Overholt made, China saved GM. GM might have well gone under without the China market. But there is an underlying issue where I think people in Washington, and now the business community, feel China may be making progress, but it is not moving quickly enough is that yes, China is more open than our allies, like Japan and South Korea in terms of business practices and engagement. But the real significant difference is that China is not the economy of 2000 when it joined WTO, and I think in those days one could let a lot of practices and a lot of things slide. And now when you fast forward to 2021, where China is such a huge economy, can it really still operate under the principles in which it joined WTO which gives it some elements of developing country status, some elements of developed country status? And I think if progress can be made in those areas, that would smooth the relationship enormously. Because otherwise we’re going to continually get these criticisms, all there’s another level playing field. Foreign businesses are not well treated, too much stealing property rights and intellectual property so on, and so forth. And that’s something I think both capitals really need to work on.
Clear protocols need to be agreed on technology
Tian Ye: Yeah, one thing has a close tie to the economic conflict is the technology competition between the 2 countries. Especially in recent years, the US has strengthened its blockade against the rise of China’s technology, from partnership between companies and academia cooperation between universities. Dr. Wang and Professor Saich, the question is, are there better ways to kind of alleviate the US concern about the rise of China’s technology power or do you think this kind of blockage and suppression will be continued? Which might even include like the prohibition of Chinese students from going to the United States to study courses including STEM.
Wang Huiyao: I really hope that the rationality will come back. Former Secretary John Kerry has visited China, the senior officials have already met twice in the last 100 days, and also that China is really working positively to help facilitate dialogue. What I think about now is that we should really keep the academic and student exchanges, that’s very vital and also it serves American interests too. It’s also true that 80% of the PhDs in the STEM field has remained in the US, that’s made a big contribution. Like in the IT companies of Silicon Valley, 20 to 30% are Asians and most are from China. I think to the interests of both US and China, if we continue in this academic exchange, and tech decoupling is not really a possibility. China has already experienced all those restrictions in the old days, for example in the 1960s when Soviet Union withdrew everything they had in China, China managed to have its own satellite and all those technology developments. So, I think that decoupling may slow down China’s figures, but China could come up, because it’s the largest application market. I really think that in the long run, we really need to work together, it’s also for the American interest. Otherwise, America will suffer. I do notice that the US now is trying to correct some of their problems, for example, as the wealth of the 1% of the Wall Street, almost equals to the wealth of 40 to 43% of the mass population in the US and President Biden is trying to tax on the rich. So, to address the domestic issues rather than using China as a scapegoat and not to mention, as Anthony said, technology itself may steal jobs, it’s not that China steals all the jobs. So, we really need to have the right perspective and I’m sure there will be competition, but let’s have peaceful competition, but then corporation is really the key to the message.
Anthony Saich: Yeah, I think there need to be clear protocols agreed between the 2 countries on the technological space and also in the research. But I do want to stress one thing again, China did start by blocking companies like Facebook, Twitter, Google, that is stopping access to technology companies to a major market. This is not just necessarily Washington’s actions even though they’d be more prevalent and more recently. On the question of STEM and STEM research, I’m not a specialist in that area, so I can’t really speak clearly but I think from Washington’s perspective, what you really need is good national security advice. I have no idea what it is potentially dangerous research from the national interest perspective and I’m sure the same applies in Beijing. The authorities on both sides need to be clear about where a national interest might be infringed by allowing not just Chinese students, but students from other countries, to engage in research in those areas and the University should be guided by that.
Beyond that, I agree 100% with Huiyao that the more collaboration, the better. At the Ash Center, we have up to about 30 fellows from China every year. We’ve always found it incredibly beneficial, particularly when young PhD students have come for a year to work on public policy issues and public administration issues. I’ve always seen that as immense value. So, I think in the current atmosphere, it’s not surprising there is caution. We don’t want that caution to tip over to paranoia and we want to try and ensure that the kinds of exchanges are beneficial on both sides. But I’m sure both sides have national security concerns which is going to restrict interactions in certain areas and that is quite appropriate. It’s applies to all countries.
Wang Huiyao: I think the best way to really build up trust is through academic exchange, students, tourism and cultural exchanges absolutely. And Tony, you have played a role on bridging the gap, we need to strengthen that. I think you’re right probably maybe we should let Google, Facebook, Twitter come in and but also US maybe relax on Huawei, Alibaba and others, that would be really great if we can see that happen.
Climate change has always been an obvious area for potential collaboration
Tian Ye: Yeah, one promising area of collaboration between the two countries is climate change. Like both of you mentioned that the climate envoy, John Kerry visited China early this month and he’s the first official representative from the Biden Administration to visit China. He has already conveyed the intention to cooperate on climate change issues. However, many scholars are still worried that the potential cooperation would be affected by the overall Sino-US complex. Can you quickly comment on this one? What’s your views on the climate change cooperation?
Anthony Saich: It always has been one of the obvious areas for potential collaboration. It falls into being collaboration and new public goods where the existing norms and institutions are not settled. And I think those are areas where China and the US and other countries can collaborate – areas of global commons like climate change, global engagement with natural disasters, global regulation for some of these tech and other areas we talked about, and I thought it was very interesting. What Kerry said was he felt this was so important that it should be divorced from other contentious areas such as views on Hong Kong, Xinjiang, Taiwan in trying to mark out terrain for collaboration. Whether those politically acceptable in Washington, I think we’re going to have to watch and see.
Wang Huiyao: Absolutely I think he’s doing the right thing. I’m quite impressed with former Secretary John Kerry, now the special envoy for climate. I’ve met him last year February at Munich Security Conference. He came to CCG roundtable and he was giving a great speech. He talked about the similar ideas as Anthony mentioned, I really think that, given the current very inactive segment, President Biden has really done something, such as he also stopped using the ethnic or nationality language to refer to the COVID-19 virus. China, US need some time to build up the trust. Let’s do this through the climate change, it would be a great area between the 2 largest countries. The next area would be pandemic, if we can work together now on what happened in India. It’s an international crisis that we proposed US and China could work together on. Rather than fighting against China, we should really work on helping solving humanitarian crisis. And finally, is the infrastructure, Biden proposed $2.3 tillion for US infrastructure and China now probably has all the technology for infrastructure, so two countries can work together. I think it’s important to have the trust, that is really the most important thing. Combating issues such as climate change will build some trust, it would be great. My staff was just telling me that we have about 1 million views online now which is great, we need more of this kind of dialogue.
Tian Ye: Thank you. Indeed, the coming issue is something so important that the two countries must find ways to work together for our planet and also for our future generations. This panel discussion is coming to an end. Allow me to express our sincere appreciation on behalf of the China Society of the Harvard Kennedy School to Professor Saich and Dr. Wang for bringing us a very profound conversation on very complex issues. Thank you both and our audience. Thank you for joining us today, have a lovely weekend, bye bye.