China's Strengthening Is Not Bad News for America

May 14, 2007 — -- "Charity rejoices in our neighbor's good, while envy grieves over it."

That quotation from Thomas Aquinas sums up the current China debate. America has a choice to make, between taking comfort in China's poverty reduction — the greatest in human history, largely achieved using our economic model — or wishing it back to the failed state it was before the boom began.

To learn more about the Intelligence Squared-US Debate series, and its May 16 debate about China, go to http://www.intelligencesquaredus.org/

Do we honestly want to deal with a stagnating country of 1.3 billion people with nuclear weapons? To grieve over China's growth is to stick our heads in quicksand. The only responsible position is to be glad that China is becoming more fit to look after its people, take responsibility for its environmental impact and meet its responsibilities as a Great Power.

China does and will present challenges to U.S. interests, some of them even what could be considered "threats." This does not mean China is a future enemy: Some of these are the same problems we manage with allies and friends from Canada to Japan to Europe, and China has many of the same geopolitical goals as the United States, so we may well need to be partners in global affairs.

How the United States reacts to China will have a significant influence on its future, and we are much better off with the challenges of a strengthening China than a collapsing or stagnant one.

On the economic side, China's currency is undervalued, its banks loan too much and the government is too quick to bail out uncompetitive firms to prevent unemployment. It is like the U.S. bailout of Chrysler in 1979-80, only 100 times over. These and other economic distortions need fixing: Some of them unfairly boost exports, and in fact almost all are being reformed in the right direction, but often at a pace that does not satisfy.

Importantly, none of these Chinese problems are existential threats to the United States or other wealthy nations. Tools are available to confront China's exports when we conclude they are unfairly promoted: The main question has been internal — whether our consumers are willing to pay more for their shopping in order to make India or Vietnam the origin of our goods instead of China.

Because when we do put punitive barriers on China's products, it is usually Mumbai and Saigon that pick up the contracts, not Michigan or Schenectady. Meanwhile, with just 43 percent our work force size Japan exports $10 billion a month to China while we ship only half of that; Germany has just one-quarter our employed population but has run a surplus with China over the 14-year period to today. Clearly China is not closed to rich-world wares; we spend too much time blaming China for growing, while our real competitors in Europe and Asia focus on their strengths.

Daniel H. Rosen is principle of the China Strategic Advisory and a visiting fellow at the Institute for International Economics.