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The Failures of the "China Fantasy"

Charles Dunst

Author

Charles Dunst

Associate at LSE IDEAS

  • China’s success has undermined liberalism’s allure by teaching the world that liberal trade does not require political liberalism—that prosperity does not require liberty

  • Both American scholars and Chinese officials recognise the inevitability of some economic decoupling between the two countries 

  • Western policymakers must find ways to limit the disruption of decoupling while allowing for both economically and strategically tolerable levels of integration

“The case for trade is just not monetary, but moral,” declared the soon-to-be US President George W. Bush in 1999. “Trade freely with China and time is on our side.”

Bush’s statement, while essentially just echoing his predecessor Bill Clinton—who declared that “the more we bring China into the world, the more the world will bring change and freedom to China”—is perhaps the best embodiment of the “China fantasy”: the view that free trade, foreign investment, and prosperity would inevitably lead to political liberalization in China, and thus peace between Beijing and Washington.

The West’s post-Cold War belief in the liberal world order’s invincibility solidified this “fantasy” in the minds of many, including US policymakers from the Ronald Reagan to Barack Obama eras. But decades of liberal economic interdependence did not foster democracy in China, whose leader Xi Jinping has in recent years tightened his authoritarian grip, undermined already modest rule-of-law reforms, and placed over one million Uighur and other Muslims in literal concentration camps. Rather, the trade-will-foster-liberalism relationship has embarrassingly worked so far only for China’s ideological benefit, illiberalizing the West by drowning our Enlightenment ideals in vast sums of Chinese capital. Meanwhile, China’s success has broadly undermined liberalism’s allure by teaching the world that liberal trade does not require political liberalism—that prosperity does not require liberty.

Free trade was supposed to liberalize China; instead, it illiberalized us. 

The Problem with Engagement

In 1993, a mere four years after the Tiananmen Square massacre, the US Secretary of State Warren Christopher announced that the United States was seeking “a broad, peaceful evolution in China from communism to democracy by encouraging the forces of economic and political liberalization in that great and highly important country.”

After the Clinton administration’s efforts to link trade with China to the Chinese Communist Party (CCP)’s improved human rights performance failed, Washington then argued that economic engagement would nonetheless create a rising middle class who, in turn, would demand democratic political power. China’s middle class has since grown, benefiting from both the country’s capitalist economy and authoritarian political system, but this middle class is composed of fragmented subgroups harboring nervousness about politics. Democratization, it is safe to say, did not follow.

“It is,” as the Chinese foreign minister Wang Yi recently said, “wishful thinking for the U.S. to change China.”

Instead, Beijing wielded China’s economic interdepence with the West to advance its own illiberal preferences on the global stage. Trade with China is now intertwined with the CCP’s construction of an illiberal Sino-centric world order defined not by precise geographic or ideological lines, nor by rules or Enlightenment values, but “by the degree of deference that those within China’s sphere of influence are willing to offer Beijing.”

China’s May bullying of Australia demonstrated this perhaps most clearly. 

After Australia expressed interest in an independent inquiry into the COVID-19 outbreak, itself the result of Beijing’s incompetence, China responded by slapping tariffs on Australian barley and suspending imports from the country’s top meat processing facilities—measures that could cost Australia over $500 million this year. The editor-in-chief of the Chinese state-run Global Times newspaper described Australia as “chewing gum stuck on the sole of China’s shoes” (an attack that is particularly aggressive in Asia), adding: “sometimes you have to find a stone to rub it off.”

Europe, for its part, should be and is worried about being reduced to gum on the sole of the CCP’s shoe.

After China’s ambassador to Germany in 2019 threatened “consequences” if Berlin excluded Huawei, the effectively state-owned Chinese telecommunications firm, from its 5G network, Germany opted to not ban the company. German trepidation is not misguided, given that Germany exports some $95 billion worth of goods to China every year.

Meanwhile, in late April 2020, the European Union itself folded to CCP pressure, toning down criticism of China in a public report on disinformation.

“China has continued to run a global disinformation campaign to deflect blame for the outbreak of the pandemic and improve its international image,” the initial report said. After Beijing got wind and expressed its displeasure to Brussels, senior European officials ordered revisions “to soften the language.”

The billions implied by Chinese trade, coupled with China’s promised retribution, have prevented many European leaders from too vociferously criticizing the CCP. The United States has similarly failed to inoculate itself to Beijing’s illiberal exports, despite the Donald Trump administration’s bluster.

In 2018, the American management consulting firm McKinsey & Company was found to have advised some of China’s most important state-owned companies and even held a retreat in Kashgar—about four miles from the concentration camps where the Chinese government is holding at least one million Muslims.

In 2019, the NBA kowtowed to the Chinese regime rather than stand up for an employee, Daryl Morey of the Houston Rockets, who backed anti-CCP protestors in Hong Kong. ESPN also recently reported that at NBA academies in China—including one in Xinjiang, where the Chinese government is interning the Uighurs—Chinese coaches physically struck players, while athletes were housed in poor conditions and deprived of schooling. American coaches said they were harassed and surveilled in Xinjiang. One former NBA employee compared the atmosphere there to “World War II Germany.” A former coach admitted: “We were basically working for the Chinese government.”

Moreover, this past June, the now-omnipresent company Zoom closed the accounts of several U.S.- and Hong Kong-based Chinese activists for holding events commemorating the Tiananmen Square massacre. Zoom said it took action because the Chinese government informed the company that “this activity is illegal in China” and that meeting metadata showed some participants were in mainland China—even though many were not.

This is engagement, but on China’s illiberal terms.

Indeed, China’s enmeshing of itself within the global economic system—a process facilitated by the United States’ free trade-implies-liberalism approach—has allowed Beijing to not only muzzle Western public and private sector leaders, but, by overwhelming the world’s markets with its imports and capital, to engender a broader loss of faith in liberal politics and the U.S.-led liberal world order.

China’s leaders, rather than discover “that social and political freedom is the only source of national greatness,” as George W. Bush proclaimed in 2002, have instead demonstrated that some form of national greatness can be achieved by engaging the international market without full-fledged economic liberalism—and without political liberalism’s constraints. 

The China challenge is thus a new one. Soviet communism, for instance, never offered a genuinely successful alternative economic model; China’s authoritarian capitalism does. Of the fifteen countries with highest per capita incomes, almost two-thirds are nondemocracies. Even largely unsuccessful authoritarian states, such as Iran, Kazakhstan, and Russia, can boast per capita incomes above $20,000. 

But fictitious allusions that US-China tensions comprise a new “Cold War” appeal to hubristic Americans like Senator Martha McSally precisely because, as Adam Tooze writes, they think they know how the first one ended—with the United States on top—and thus assume liberalism’s contemporary victory over China to be similarly inevitable, even though 21st century China poses a much more daunting challenge than the 20th century Soviet Union (and even though the United States did not, in fact, win the Cold War in Asia, as evinced by its losses in Việt Nam, Cambodia, and Laos, and stalemate in Korea). 

American billions did not liberalize China. Instead, China took advantage of the West’s misguided optimism—its certainty in liberalism’s determined sweep—to teach the world that reaping the rewards of liberal trade does not require political liberalism, and that liberal democracy, complete with truly liberal economics, is no longer the only path to prosperity. 

Recognise and Respond to Reality

The American and broader Western response to China’s global illiberalization efforts should be twofold. 

First, the West’s private sector would be wise to remember that its products are almost always superior to those produced in China, and that the People’s Republic needs them more than the other way around.

The NBA is a prime example of this. China has no hope of developing a competing basketball league, and the rotting Beijing regime cannot afford to cut its basketball-loving citizens off from the best league on the planet. “It pays,” as Holman W. Jenkins, Jr. writes, “to not overreact.” If the league stood its ground, China would likely have eventually caved to domestic pressure (albeit quietly, to save face with its nationalistic constituents) and thus to the NBA. China will similarly eventually cave to Hollywood if American filmmakers refuse to coddle Chinese censorship.  

Secondly, in terms of government relations, the West would be wise to pursue extremely careful partial decoupling from China. Trade with China, as previously mentioned, is fundamentally intertwined with China’s construction of an illiberal Sino-centric world order. There is no disaggregating China’s economic interests from the regime’s illiberal geopolitical designs. 

And while decoupling could be painful if pursued rashly and too broadly, both Beijing officials and American scholars recognise that it is already underway. Chinese foreign direct investment in the United States has plummeted in recent years, while far fewer Chinese students are studying in the United States than before.

The challenge, to which the United States under a more competent president could rise—and from which the West as a whole would benefit—is successfully managing partial decoupling by limiting disruption and allowing for both economically and strategically tolerable levels of integration. 

Limited decoupling certainly does not require the wholesale (and assuredly disastrous) unwinding of the American and Chinese economies, but it does need a new consensus-building effort through which the United States can domesticate certain key industries like pharmaceuticals and technology (or least shift them to more friendly countries), reduce relationships with Chinese companies and universities, and blacklist cheating Chinese companies, all while creating “meaningful new agreements and technical standards alongside allies and partners.”

For these liberalization efforts to succeed, however, Western private and public sector leaders need to wake up from their decades-long dream of liberal internationalism, recognise the reality of Chinese authoritarianism, and reevaluate their countries’ and firms’ relationships with a Great Power whose illiberal ruling regime demands complicity.

“One life is all we have and we live it as we believe in living it,” Joan of Arc proclaimed. “But to sacrifice what you are and to live without belief, that is a fate more terrible than dying.”

About the Author

Charles Dunst is an associate at LSE IDEAS and a journalist who has written for The New York TimesThe AtlanticThe Washington PostForeign Policy, and the Council on Foreign Relations. Twitter: @CharlesDunst

This article gives the views of the author, and not the position of the China Foresight Forum, LSE IDEAS, nor The London School of Economics and Political Science.