The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (
) -- China-bashing is back with a vengeance. American politicians know that voters love this type of tough talk. They also love a bogeyman that can be fingered for the nation's economic ills. Red China, the last bastion of the evil communists is a perfect Darth Vader-like replacement for America's former arch nemesis, the Soviet Union. There it lurks manipulating its currency, stealing intellectual property, aiding U.S. enemies, abusing human rights and causing America's trade deficit. So what if this takes China out of context, most Americans don't know that.
The Chinese have made it clear that they don't like the rhetoric, except when it can be repurposed into rhetoric on the dangers of democracy and individual freedoms. For example, America as a greedy soon to be ex-economic superpower suffering from capitalism gone wild, being led by a failed democratic system that prioritizes opposing points of view over national progress. Add to this a warmongering nation obsessed with military power following in the footsteps that felled the Soviet Union. So what if it takes America out of context, most Chinese don't know that.
The titan's verbal sparring is dangerous. It's no wonder that in China and elsewhere in Asia there is talk of a second cold war. Only in Cold War II, the communists are the odds on favorite to win because China is fingered for economic supremacy.
China's economic supremacy is anchored in Asia's century. As much as America would love to be at the center of Asia's rise. This is not in the green tea leaves. China, the Asian giant with 1.34 billion people, astronomical growth, and sitting in the front and back yard of Asia is sitting pretty for the commanding role in the 21st century.
China is already the largest trading partner of half the countries in Asia. Meanwhile the U.S., stuck in the Cold War I global super cop mindset is taking extra militarily measures to defend its Asian allies in the neighborhood, while its "protectorates" build economic ties with Darth Vader. So America is producing guns while everyone else is producing butter.
There is no question that China and America are destined for a collision course -- that is completely avoidable. The key is putting the two nations vastly different political, economic, historical and social cultural systems into context.
Red China, the big bad communist state is an archaic concept. China does have a single party state, its highest leaders are not directly elected and many individual freedoms are curtailed. But it is not functioning like a despotic state that does not consult or value the input of its people.
China is forging its own political path that contemplates: India's suboptimal outcomes where the political system was liberalized before the economic system, Russia's disastrous simultaneous plunge into democracy and free markets, and the lingering effects of its recent history where communism went wild.
China is also following its own economic development path. It's not the Washington Consensus. It's the Beijing Consensus. It's a more gradual, trial and error approach with hefty state involvement. The Chinese won't be bullied into the western prescription. Besides who are Americans to say what's best for a financially independent country with four times the population, and the heir apparent economic superpower. China has every right to place its personal superpower mark on the world by attempting to devise a superior non-Western alternative.
There is though much work to do before superiority can be proclaimed. America's view of China as affluent is wildly out of sorts. In 2010 the average per capita income (pci) on a nominal/purchasing power basis was $4,382/$7,519 in China and $47,000/$47,000 in the U.S. China's income is growing quickly but according to World Bank estimates even in 2050 China's average pci will be half of America's. In 2050 "the dying superpower" America is forecast to have a pci of $86,900, the highest of the thirty most populous countries.
This misperception of China and many others is founded in a giant misunderstanding. China is not a jumbo version of developed Japan. China is a developing nation. Viewed in this context many accusations being leveled at China, such as intellectual property thieves, human rights abusers and aiding U.S. enemies could be leveled at most of the 162 developing countries in the world. This is because they are not Chinese maladies they are the maladies of any country that is still developing. The cure for these maligned actions is economic development.
The misperceptions of America are founded in many misunderstandings. America, its origins, the development of its systems and its people are unique. Today it is the most inhomogeneous, individualistic, risk tolerant, resilient, meritocratic, unsentimental, freedom obsessed country in the world.
Misperceptions of America are why so many think that the U.S. is a dying superpower. The U.S. has been the world's largest economy since the late 19th century, and epitaphs are written every time it stumbles. It's hard for others to imagine but even before 1776 every time the U.S. has stumbled it has innovated and improved its systems of democracy and capitalism. No crying over spilled milk here.
Americans apply their uniqueness in politics to cure political dysfunction. Unlike China, America is a multi-party state, and they don't hold their leaders on a pedestal. When politicians disappoint, Americans exercise their freedom of speech to brutalize them in the media and then their political freedoms to vote them out of office.
Greedy Americans is another misperception. Americans are as angry as anyone that a handful of greedy financiers abused the nation's beneficial system of meritocracy and cast the entire country into an odious light.
As to the stereotype of Americans as warmongers, a recent Pew Center study shows that Americans don't want to be the world's policeman anymore and they are not keen on sacrificing old age benefits for armaments. The challenge America and its allies face is what could happen without America as a global cop. Who will assume America's outsized role in stopping the likes of the Milosevics and Gaddafis of the world, the Taliban and al Qaeda, or checking the actions of unstable nuclear-armed nations? China's position on honoring the acts of national sovereigns takes it out of contention.
If the Chinese and American systems can be placed into context, there will be an opportunity to see, that their people are similar in some significant ways. Both are entrepreneurial, hard working, and they place a high value on education. They are also interested in peace. This may seem like an odd characteristic to ascribe to Americans but the nation was founded on the principles of non-intervention. After WWII someone had to check the Soviet Union's aim for global communism and the freedom obsessed Americans knew that they were the only choice.
The U.S. and China are also an economic partnership made in heaven. They possess the classic value exchange: one offers access to an attractive market, the other to advanced technologies and services. America needs access to new markets. The Chinese need to morph their economy from being export to domestic-demand driven, from being low-cost labor driven to efficiency and then innovation driven. The U.S. as the leading nation for productivity and innovation knows a bit about the challenges China is facing.
The U.S. has less than 5% of the world's population, but it drives 25% of global GDP. (China's population is 20% and its GDP is 10%.) Driving high-income levels with hundreds of millions of people is really hard, and to date only America has demonstrated that it knows a formula to do this. In includes things like world-class universities. According to
US News & World Report,
62% of the top 400 universities in the world are in the U.S. China, including Hong Kong has 1.25%. It also includes being able to support and protect individual freedoms for hundreds of millions, and seeing in failure not shame but an opportunity to become stronger.
The biggest challenge for developing this partnership is building trust, which starts with ending the rhetoric and replacing the notion of adversaries with allies. If China and the U.S. can agree on two things: (1) to be responsible powers committed to the goals of peace and prosperity and; (2) to be respectful of alternative political and economic methods to achieve this, the two can be superpower allies that will earn the respect of the world.
It may seem like the odd couple: the largest western nation who is the leading proponent of democracy and the largest eastern nation striving for a superior quasi-socialist formula. But, together they can create a powerful east-west combination that can unify the world rather than divide it -- the world doesn't need another iron curtain.
If the two largest economies take an alliance rather than an adversarial path, they would propel their economies and with it all economies would rise. This has a better sound than the death and destruction of another cold war.
Dee Woo contributed to this article.
Proclaimed Citizen Economist by Forbes China, Dee Woo first gained international attention by writing a personal letter to Barack Obama in October 2010, attempting to dissuade the US from initiating a trade war with China. As a result, he was featured in much of the Mainland Chinese media, as well as in Hong Kong, Singapore, Macao, Malaysia, Canada and the US, including by the Wall Street Journal. Now he is an Economics columnist for many prominent financial media cross the east and west.