What’s the right amount of business to do with a country like China?
America remains pretty heavily exposed to the Chinese economy, despite the trade wars of the past few years. In 2019, the American economy exported more than $100bn in goods to China and imported about $450bn worth. Many of the large American corporations that we work for, or buy from, or whose stocks make up part of our retirement portfolios are highly dependent on sales to the Chinese market, or productions chains partly located in China, or critical technology purchased from China. The Trump administration is pushing European allies to stop doing business with Huawei, the big telecoms firm that’s been engaged in building out 5G networks across much of the West. But Ericsson and Nokia, Huawei’s chief competitors, also manufacture in China. China is the world’s second largest economy (largest, on a purchasing-power parity basis) and very easily the world’s largest exporter. Its role in global commerce cannot be overstated.
It is also a country governed by an odious state. No government is perfect of course, even the world’s advanced democracies behave atrociously from time to time, and in recent years America has certainly demonstrated the limitations of the West’s moral authority. But China is in a category far different from the flawed democracies of the rich world. It has placed one million or so members of ethnic minorities, primarily Uighers, in what are essentially concentration camps. It subjects members of ethnic minorities to forced sterilisation. Its behavior, some experts say, is tantamount to genocide. Then there is Hong Kong: a liberal city-state whose residents have campaigned, for decades, for the deepening of democracy. The Chinese government is now working to dismantle the “one country, two systems” framework under which Hong Kong has operated since the handover from the British, and is moving to impose mainland-style oppression.
And how about that oppression? It’s certainly understandable that someone born into a China, in the late 1970s, in which average income per person was about $700 per day, and who now lives in a society in which the average is more than 20 times that figure, might be tolerant of a style of government that citizens of democratic countries find beyond the pale. But it would be dead wrong—indeed, racist—to assume that Han Chinese living on the mainland are unbothered by the intrusive, authoritarian regime they live under. It is an unfree place, where people cannot choose their leaders, cannot freely criticize the government or talk about past policy errors, and where their movements and communications are all subject to intense surveillance. Chinese citizens deserve better.
Relations between the world’s rich democracies and China over the past four decades have of course been shaped by hard-nosed geopolitics and the economic return to engagement. In the early 1980s, when China’s opening-up was in its very early stages, there was also a profound moral argument in favour of deeper integration with China. The historical pattern across East Asia seemed clear enough: openness and industrialization were invariably followed by political reform and liberalization. Enmeshing the Chinese economy more deeply into the global economy stood to strengthen the Chinese government’s commitments to market reforms—and thus to erode the state’s control over the domestic economy. China, in the early 1980s, was also home to the world’s largest concentration of severe poverty. Engaging economically with China promised to raise the incomes and living standards of hundreds of millions of people.
On this last count, integration with China has clearly delivered, a fact for which we can all be thankful. The share of the Chinese population living on less than $1.90 per day now stands at about 0.5%, down from more than 80% in the early 1980s. China’s growth miracle has been the most successful anti-poverty program in history.
In most every other respect, China’s development has proven a disappointment. The events of 1989 made clear that political liberalization in China would not be progressing in the same manner as its economic liberalization. Two decades ago, when American leaders were working to add China to the WTO, it was possible to argue that incorporating China more completely into global institutions and legal regimes would bind its government into a recognition of the rule of law, in some spheres of activity at least. Today, one simply cannot say that the Chinese state is bound by the rule of law, and neither is it possible to draw any clear line between large Chinese businesses and the Communist Party. Furthermore, it was also obvious by the turn of the millennium that Chinese economic development served to strengthen the power and legitimacy of the Party.
As these disappointments mounted, the rich world very quickly became too dependent on China to pitch much of a fuss about Chinese authoritarianism. Dependent, in some cases, in the sense that production simply could not take place without Chinese components or facilities. Dependent, in others, in that the money to be made from working with China was simply too damn much to allow executives to indulge in any moral anxiety. And so Chinese saber-rattling, and abuse of minorities, and disregard for Hong Kong’s freedoms, and backsliding on market reforms, and moves toward a more dictatorial political regime—all of those things and others—made for troubling PR for big companies with close ties to China, but not much action.
Instead, we are discovering how economic interdependence with a deeply illiberal state erodes liberal values at home. Companies self-censor in order to maintain access to the Chinese market, making themselves complicit in the Party’s efforts to misinform its population and maintain power. The NBA’s embarrassing decision to apologize to China for comments made by Rockets’ GM Daryl Morey in support of Hong Kong protestors illustrates how Chinese power stifles speech by Americans in America. The rich world’s political support for Taiwan and Hong Kong, where people courageously stand up for democracy and liberal values, has been nothing short of pathetic. It’s a deeply unnerving experience to watch leaders in America and Europe tip-toe around the Party’s sensitivities for fear of the economic costs. Are there not some things in life that matter more than underexploited opportunities for profit?
Some change is underway. Trump’s poorly waged trade wars have had an effect. But the mood in rich democracies has turned for other, more enduring reasons, as well. Firms whose supply chains run through China are waking up to the political risk to which they have exposed themselves and their investments. Big tech companies have grown increasingly angry with Chinese spying and theft. America’s national security establishment has grown increasingly worried about vulnerabilities associated with the use of Chinese technology, and with the risks created by the loss of certain manufacturing capabilities which might be needed during a national emergency. A certain amount of economic disengagement now underway will unquestionably outlast the Trump administration.
And yet there is a striking apathy concerning the moral threat posed by China: an assumption that democracies can’t or shouldn’t refuse to do business with China on the basis of its human-rights abuses. A leader in this week’s Economist captures a common attitude well:
The logic of the Huawei ban is one of disengagement and containment. But this will not work if it is applied across the entire economic relationship. The West’s last great authoritarian rival, the Soviet Union, was a trade minnow. China accounts for 13% of world exports and 18% of world market capitalisation, and is the dominant economic force in Asia.
Instead a new trade regime is needed that acknowledges China’s nature.
Is China really just too damn important to the global economy for the world to be bothered by a little genocide?
That’s a bit unfair. Disengaging from China is tricky, and not just because of the economic disruption it would cause. There is no guarantee that isolating China economically would force it to improve its behavior. Backing the Party into a corner might well make it more aggressive and less responsive to outside criticism. Domestic dissent in China does not often make itself seen, and it is hard to guess what potential there is for a movement within China to demand greater political freedom and an end to human-rights abuses, but there is a risk that a more confrontational approach to the Chinese government could increase domestic support for the Party rather than reduce it.
China is also storing up some very serious economic problems which could ultimately force political change without much effort being expended by outsiders. Over the past two decades, Chinese productivity growth has tumbled. It is unlikely that this trend can be reversed without major reform, and if the trend cannot be reversed then Chinese economic growth will soon grind to a near-halt. China’s working-age population is shrinking; in the decades ahead its population as a whole will begin shrinking and aging in pretty dramatic fashion. China may have already passed the point of its maximum economic leverage; to the extent that its geopolitical leverage continues to grow, that is primarily a consequence of an absence of cooperation and common purpose among advanced democracies. It may be that before long China’s problems catch up with it, without other countries having to do much of anything.
But the point of disengaging with China over its moral abuses is not first and foremost to achieve regime change. It’s about affirming important values, to ourselves and to others. It’s about reminding ourselves and others that there are more important things than gains from trade and cheap electronics. As a society, we feel comfortable arguing that it was wrong to do business with Nazi Germany, and wrong to do business with apartheid South Africa. Should we not also recognize that it is wrong to do business with China? Should it really be the case that once a country’s share of world exports crosses a certain threshold, that country has a free pass to set up concentration camps?
No decision about a country’s relationship with China can be made lightly. It is a superpower, with all the capacity to wreak global havoc that superpowers enjoy. It’s also very reasonable to lack confidence in the current administration’s motives in picking fights with China, and in its capacity to shift policy toward China in a considered, moral way.
But are we really prepared to turn a blind eye to a superpower’s gross indifference to fundamental human rights and the rule of law because we’re worried about the effect on business? I worry that to make that decision and stick with it in the face of China’s abuses leads liberal democracies and the world as a whole down a very dark and dangerous path. I like watching fun TikToks and don’t relish the idea of paying more for an iPhone, but if the treatment of the Uighers isn’t enough to move us to pull back from China, I shudder to think what might—or might not.
"Should it really be the case that once a country’s share of world exports crosses a certain threshold, that country has a free pass to set up concentration camps?"
I can think of countries with much smaller economic power that seem to have a free hand in committing human rights abuses. Israel and Saudi Arabia, two countries that the United States has a very friendly relationship with spring to mind.
If we were very concerned about human rights w/r/t our trading partners, we could exercise a lot more leverage over Israel and Saudi Arabia than we could over China. Why don't we do it then?
I think the answer is that Israel and Saudia Arabia can be counted on to do whatever the US needs of them, economically and politically, whereas China does its own thing. If you obey the US, we'll look the other way on human rights abuses. If you don't, we'll take you down if you're small enough (Iran, Venezuela, Iraq, Nicaragua, etc), or fret about what to do with you if you're too big (China).
I'm interested to hear alternate explanations.