Seven Overlooked Characteristics Of US-China Relations Americans Need To Know
By Michael ‘Mike’ Sacharski, Pacific Enterprise Capital International, Honolulu - Houston
Our members at IBC are on the pulse of global business and making sense of global change. Our latest series of IBCircle Hobnob Blogs addressing business issues and opportunities that will soon be top of mind within our Community, launches with some thought-provoking insights from US-China Relations expert Michael Sacharski. Michael will be our IBCircle Global Program Speaker on March 9, 2023.
1. If America is expecting the rise of a Chinese Gorbachev to change the Communist Party of China’s (CPC) continuing trajectory forget it….not going to happen.
CPC policy directed at the United States past, present and future was formulated in the late 1930’s to become catechetical belief a Leninist-governance model with Chinese characteristics will, in time, lead China to replace the United States as THE decisive world power. This mission will be severely challenged externally but cannot be compromised internally. Since the tumultuous years 1989 – 1991, the Party has steadfastly insulated itself against the rise of a Gorbachev-type leader emerging from within its ranks. The Party is now, and into the future, determinedly hard-wired against a potential outbreak of “Gorbachev disease”.
2. There will be no historic U.S. – China three-day breakthrough summit producing landmark tension-reducing agreements and protocols.
The U.S. – China relationship will remain competitively and confrontationally contentious for decades to come. Progress toward alleviating these tensions, as they may be, will be in gradations of years with specific issue-resolution taking decades. Issue-resolution will be prolonged by the continuing clash of values, divergent interests and differentiated implementation styles. The U.S. and China are entering a period of “circumscribed accommodations” in which the sum-total of the bi-lateral relationship is dividing into carefully circumscribed relationship categories. These accommodating behaviors will be sufficient to carry the relationship through until there is a possible, strategic breakthrough agreement some years into the future.
3. The CPC has specially designed an economy that has NO comparable equivalents to other world economies…it is not the CPC’s intention to be comparable to anyone.
China’s economy is designed to deliver and protect the Party’s fulfillment of its unique policies and objectives barring interference from within or influence from without. The system is laced with encryptive protections to guard against intrusions be they foreign economic principles such as “invisible hands” or foreign methods of metric analysis like GDP. The practicum period for refining this system was the first great U.S. – China decoupling of 1950 – 1979 when all relations between the two countries, political, economic, cultural and social were completely severed. Within the ideological framework of 1930’s Party principles this separation was to be expected. For the same reason the CPC anticipates there will be more U.S. – China decouplings in the future. The Party believes it has a fundamentally sound system that can withstand these inevitable future shocks.
4. Americans have little to no understanding of China’s most elegant and successful operating feature: use of non-convertible Yuan for domestic-only transactions and use of other countries freely convertible currency for international-only transactions.
China’s two-currency system enables the CPC to build both capacity and capability in a way that when projected out over subsequent years will undercut the value-propositions of every other economy in the global trading system. Non-convertible domestic Yuan is used to fund domestic capacity-building on an unprecedented scale; other countries’ foreign currency is used to acquire advanced capabilities from around the world. Imported advanced capabilities are turned, via high-capacity-making methods, into low-cost commodity-like products. When exported, these low-priced, just-good-enough products, undercut the original high capability product in its own home market. By 2010, the CPC became confident its two-currency system allowed China to impact the global economy, but the global economy could not impact China.
5. Effectively dealing with China will take much more “oxygen” than the U.S. is currently estimating.
America, for the most part, even in the current era of Congressional China “bulk-up” legislation, is dramatically underestimating the quantity of recurring resources the U.S. government and American enterprises will need the next several decades to contend with China. The basics: human, financial, organizational, facilities, scope of operations. Allocating more resources should not be a “tit for tat” or a “work smarter” response to China as much as the recognition a prolonged period of managing the bi-lateral relationship is going to be tremendously consumptive. If there is going to be any on-going effectiveness by the United States in bringing the relationship into a closer working alignment than circumscribed accommodations, the shelves of our effort need to be restocked each day.
6. China has strengths and weaknesses; the challenge is to know which are most critical to managing the U.S. – China relationship.
Not all strengths and weaknesses in China carry equal impact. Some are stunningly more significant than others. America’s challenge is to sort through and identify the significant from the not-so-significant that pertain directly to the U.S. – China relationship. Concentration on select leverage points is key to avoid being distracted and effort diluted over matters that have no critical significance to the bi-lateral relationship. Xi Jinping has observed, “Governing a big country is as delicate as frying a small fish.” One might say the same for U.S. – China relations. In the end, it’s knowing which conditions are more delicate than others.
7. The journey to stabilizing U.S. – China relations begins first and foremost in America itself.
A strong, vibrant America at home, is by extension, a strong, vibrant, successful America abroad. A mediocre America at home, is by extension, prone to weakness and failure overseas. In the coming years our basic institutions that preserve and protect America’s basic building blocks of freedom, innovation, entrepreneurship, enterprise management, investment capital and rule of law need continuing nourishment and strengthening. It is part of the “oxygen” requirement previously mentioned in this memo. The United States has a unique window of opportunity between the years 2023 and 2030 to reinforce as well as expand those qualities that contribute to making a strong, vibrant America at home and a strong, vibrant, successful America abroad.
Why this list?
Identify, admit and own the reality of the matter
Concentrate on core issues
Identify the right problem, choose the right solution
Michael Sacharski
808-782-7042