FREEMAN REPORT. More In This Issue. FEATURE ESSAY From Complement to Convergence: How Will U.S.-China Relations Cope with a Setback in Globalization?

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1 Freeman Chair in China Studies FREEMAN REPORT More In This Issue PUBLICATIONS Crafting U.S. Economic Strategy toward Asia: Lessons Learned from 30 Years of Experience by Charles W. Freeman III and Matthew Goodman China s Rise: Challenges and Opportunities by C. Fred Bergsten, Charles W. Freeman III, Nicholas R. Lardy, and Derek J. Mitchell CONFERENCE November 7 U.S.-China Engagement for a Global Century FREEMAN FACTS Renewable Energy in China (cont pg 5) Quote Of The Month It is clear that China accepts its responsibility as a major world economy that will work with the United States and other partners to ensure global economic stability I hope that the next U.S. President will expand on the Strategic Economic Dialogue (SED) to take U.S.-Chinese relations to the next level. ~ U.S. Treasury Secretary, Henry Paulson, speaking at the annual gala of the National Committee on U.S.-China Relations in New York. China is expected to serve as a continuing driver of global growth while learning important lessons from the current financial crisis. Source: Reuters, October 21, 2008 The Freeman Report provides an open forum for individual opinions and commentaries on China. All opinions expressed in the feature essay of the report are those of the author. FEATURE ESSAY From Complement to Convergence: How Will U.S.-China Relations Cope with a Setback in Globalization? Soon after the onset of the current global financial turmoil, Niall Ferguson declared the end of Chimerica, the symbiotic relationship between a productive China and a consumptive United States that aligned the world s status quo power and its most significant challenger for much of the past decade. If the forces of globalization that brought the interests of the two countries into symmetry are no longer sustainable, how U.S.-China relations will fare in the post-chimerica era is an important question to ask. After Chimerica: How Can U.S.-China Relations Achieve a Soft-Landing in a Changed World? As two non-typical nation states, China and the United States represent two kinds of civilizations: the East and the West; the developing and developed; the new and the old. U.S.-China relations are not, after all, a typical bilateral relationship. It is inaccurate to equate China s rise with America s decline, if the terms are applicable at all. First, let s examine China s so-called rise. There are three dimensions of the rise : historical (the great rejuvenation of the Chinese nation), present-oriented (China s achievements in a globalized world), and future-oriented (the inevitability of a multi-polar world occasioned by a surging Asia). In addition, China has multiple identities. Liang Qichao, a great scholar at the turn of the 20th century and one of the fathers of Chinese nationalism, divided Chinese historical (cont pg 2) In The News BY WANG YIWEI BEIJING The Third Plenary Session of the 17th Communist Party of China (CPC) Central Committee was held on October 9 to 12 in Beijing. A major decision on rural reform was made, including plans to upgrade the land management system, expand agricultural policy support, establish a modern rural financial network, and strengthen rural democracy. CPC pledged to increase investment in rural public services, asking government agencies at all levels to adopt China s national rural development strategy. Beijing s new rural growth policy marks a critical stage of what is regarded as the country s largest economic reform in years. BEIJING China chaired the 7th Asia-Europe meeting (ASEM) on October 24 and 25. The 2008 summit was the largest so far, with six new participants expanding the ASEM membership to 45. Leaders tackled a range of global challenges affecting both regions, including the worsening global financial crisis. Chinese President Hu Jintao met President of the European Commission Jose Manuel Durao Barroso on the sidelines of the summit, confirming China s willingness to push forward its comprehensive strategic partnership with the EU.

2 Page 2 emergence into three parts ( China s China, Asia s China and the World s China ), which also embody China s three identities national, regional and global. There is the fourth identity for China now its role and status among the community of developing countries. If one considers separately each of the above dimensions and identities, there are twelve different components to China s rise, based on the multiplication principle (3 times 4). Second, let s rethink the so-called America s decline. America s so-called decline also has three dimensions. The dispersion of American power horizontally, across institutions, is ongoing. In the vertical dimension (Joseph Nye s three-dimensional chess board of military, economic and political terms), America has primacy only as a military superpower; whereas in economic and political terms, the country is part of an increasingly multi-polar world. In historical terms, America s decline is linked with the overall decline of the West and return to the global status quo ante prior to European adventurism. Also, there are two American identities. In the Chinese philosophical construct of yin-yang, one is male (yang), an aggressive global hegemony and a provider of international public goods. The other is female (yin), a more inward-looking and less-internationalist entity. Since there are four Chinese identities and two American identities, U.S.-China relations have eight models (4 times 2) in total. In coining the term Chimerica, Niall Ferguson described one of them the first stage of globalization in which China mainly acts as a producer and America as a consumer. In this stage, China s rise is one of the main supporters of American hegemony. However, to grasp the true essence and the future of U.S.-China relations in ways that transcend the cliché of China s rise and America s decline, we should depart from theoretical models and return to the real world. The so-called 3-F crisis financial crisis, fuel crisis and food crisis, reveals that globalization is reversible. The world hangs in the balance between evolution and revolution. How can U.S.-China relations achieve a soft-landing in such a reversible and uncertain world? From Harmony without Uniformity to Uniformity without Harmony? With the increase of domestic demand and the development of a harmonious society, China s China and the World s China are on the ascent. Meanwhile, America will have more and more difficulties in providing public goods for the world, while the country increasingly turns inward. Thus, male America is in decline, while female America is on the rise; the World s America is giving way to America s America. As a result, the nature of U.S.-China relations is shifting from mutual complement to convergence. Around 2,500 years ago, Confucius argued, The gentleman aims at harmony, and not at uniformity. The mean man aims at uniformity and not at harmony. How can China and the U.S. handle the new paradigm of the relationship to avoid the mean man outcome? This is a true challenge for the future leaders both in China and in the U.S. In putting forward the "responsible stakeholder" concept in 2005, former Deputy Secretary of State Robert Zoellick tried to identify China s new world role, persuading (in my terms) the world s China to share responsibilities with a declining male America. China aspires to be a constructive cooperator with the United States in international affairs. Fred Bergsten at the Peterson Institute for International Economics even goes further by advocating a G-2 model for U.S.-China relations, turning China into a partnership of equals. All these endeavors aim to transcend a nationalist, zero-sum game mentality of two tigers cannot live in one mountain, but fail to reach what I believe to be an appropriate conclusion that the U.S.-China relationship has to ultimately achieve a great convergence as the harmonious co-existence of eastern and western civilizations. With that in mind: 1. Convergence means compatibility, but does not mean assimilation. America s today is not China s tomorrow. Does America really need an Americanized China? Does China really want to be Americanized? 2. Convergence is the long-term trend, not temporary alikeness. China and America have different populations, cultures, and social structures, and seeking to be alike is not realistic. During the current financial crisis, we can hear self-deprecating humor from the American: We are all Chinese now and the Chinese are becoming more like us, even as we are becoming more like them. But this is just humor. 3. Convergence is a stage in the world s evolution. Like a Chinese proverb says, After a long split, a union will occur; after a long union, a split will occur. (cont pg 3) CENTER FOR STRATEGIC & INTERNATIONAL STUDIES FREEMAN CHAIR IN CHINA STUDIES

3 Page 3 4. Short-term tactical considerations in U.S.-China relations are important, but long-term strategic calculations are of paramount importance. Another old Chinese saying has it that, Without long-term strategy, short-term achievement is impossible. Without full-scale consideration, simple action is impracticable. We should go beyond the current financial crisis and American general election to rethink the future of U.S.-China relations. Old China vs. New America: Sino-US Relations Should Seek Three Beyonds If Senator Obama is elected, the world will witness a new and different America. This contrasts with the trend in China, which is increasingly returning to its cultural and historical Chinese roots. In this way, America is likely to face an old China while China is likely to face a new America. Accordingly, the mutual perceptions between China and the U.S. should be adjusted to match the new reality and seek three beyonds to grasp the future of U.S.-China relations: beyond bilateral means, aiming for global results; beyond identifying common interests, aiming for genuine consensus; and beyond managing relations within narrow political cycles, aiming for long-term strategic stability. Ultimately, the two countries should seek to move beyond the zero-sum mentality of a Beijing Consensus or a Washington Consensus and aim for the win-win model of a Beijing-Washington Consensus. Are China and the U.S. ready for such a substantial reorientation? Wang Yiwei is associate professor at the Center for American Studies, Fudan University in Shanghai. Publications Crafting U.S. Economic Strategy toward Asia: Lessons Learned from 30 Years of Experience, CSIS Asia Economic Task Force Report, By Charles W. Freeman III, Chairholder, CSIS Freeman Chair in China Studies, CSIS, and Matthew Goodman, Managing Director, Stonebridge International Among the many pressing realities that will confront a new U.S. Administration in January 2009 whether Republican or Democratic will be the need to manage the challenges and opportunities of a rising Asia. Drawing on the experience of a bipartisan group of former U.S. government officials and other experts who, among them, have been involved in all of the major Asian economic policy initiatives of the past three decades, a CSIS task force has produced a new report reviewing the most important lessons learned from that experience, in an effort to provide the new Administration with a practical user s guide to managing U.S. economic relations with Asia. China s Rise: Challenges and Opportunities, Peterson Institute for International Economics and CSIS, (Washington, DC: September 2008) By C. Fred Bergsten, Charles W. Freeman III, Nicholas R. Lardy, and Derek J. Mitchell This book examines key aspects of China s global role and U.S.-China relations, and is the publication of the China Balance Sheet project which has been conducted by the Peterson Institute and CSIS over the last three years. Our initial product, China the Balance Sheet: What the World Needs to Know Now About the Emerging Superpower was released in The new volume identifies the most important future areas of challenges and potential cooperation in U.S.-China relations. Conferences & Events November 7 U.S.-China Engagement for a Global Century James Wolfensohn, Chairman of Wolfensohn & Company and the 9th president of the World Bank group from 1995 to 2000, will deliver a keynote address to discuss China engagement strategies for the next U.S. administration. This is the inaugural event in the CSIS Speaker Series on U.S.-China relations, which will provide a platform for senior opinion leaders to debate issues related to a rising China and implications for the United States. Charles Freeman, Chairholder of the CSIS Freeman Chair in China Studies, will open the discussion. October 27 Crafting U.S. Economic Strategy toward Asia: Lessons Learned from 30 Years of Experience The CSIS Asia Economic Task Force released its new report on managing U.S. economic relations with Asia based on the experience of a bipartisan group of former U.S. government officials and other experts. A panel of the task force members, Tim Adams, Managing Director of the Lindsey Group, Charles Freeman, Chairholder of the CSIS Freeman Chair in China Studies, Matthew Goodman, Managing Director of Stonebridge International, and Bill Reinsch, President of the National Foreign Trade Council, discussed the report s main findings.

4 Page 4 PUBLICATIONS FROM THE FREEMAN CHAIR 2007/2008* * Please visit our website to access archived publications dating back to October Crafting U.S. Economic Strategy toward Asia: Lessons Learned from 30 Years of Experience, CSIS Asia Economic Task Force Report, By Charles W. Freeman III, Chairholder, CSIS Freeman Chair in China Studies, and Matthew Goodman, Managing Director, Stonebridge International September China s Rise: Challenges and Opportunities, Peterson Institute for International Economics and CSIS (Washington, DC: September 2008) By C. Fred Bergsten, Director, Peterson Institute for International Economics, Charles W. Freeman III, Chairholder, Freeman Chair in China Studies, CSIS, Nicholas R. Lardy, Senior Fellow, Peterson Institute for International Economics, and Derek J. Mitchell, Senior Fellow for Asia, International Security Program, CSIS. June Assessing Chinese Government Response to the Challenge of Environment and Health, CSIS, June 2008 By Charles Freeman, Chairholder, Freeman Chair in China Studies, CSIS, and Xiaoqing Lu, Research Associate, Freeman Chair in China Studies, CSIS La Democrazia Gestita [Managed Democracy], Aspenia, No. 41, 2008, Aspen Institute Italia By Melissa Murphy (contributing author), Research Associate, Freeman Chair in China Studies, CSIS May China-Europe Relations: Implications and Policy Responses for the United States, CSIS, May 2008 By Bates Gill, Director, Stockholm International Peace Research Institute (SIPRI), and Melissa Murphy, Research Associate, Freeman Chair in China Studies, CSIS February Foresight: 2008, Exclusive Analysis Limited, London: 2007 By Melissa Murphy (Contributing Author), Research Associate, Freeman Chair in China Studies, CSIS Assessing China s Response to the Challenge of Environmental Health, China Environment Series 9, China Environment Forum, Woodrow Wilson International Center for Scholars, 2007 By Xiaoqing Lu, Research Associate, Freeman Chair in China Studies, CSIS, and Bates Gill, Director, Stockholm International Peace Research Institute January Trade with China: The E.U. Speaks with an American Accent, Atlantic Outlook, vol. 2, no. 1, CSIS, January 29, 2008 Critical Questions: China s Economy and the Subprime Crisis, CSIS, January 29, 2008 Decoding Chinese Politics: Intellectual Debates and Why They Matter, CSIS, January 2008 By Melissa Murphy, Freeman Chair in China Studies, CSIS 2007 November China: An Olympic Hangover?, Global Forecast: The Top Security Challenges of 2008, CSIS, November 2007 China s Civil Society Organizations: What Future in the Health Sector?, CSIS, November 2007 By Bates Gill, Director, Stockholm International Peace Research Institute, J. Stephen Morrison, Director, Africa Program, CSIS, and Xiaoqing Lu, Research Associate, Freeman Chair in China Studies, CSIS The China Report 2008 Melissa Murphy (contributing author), Exclusive Analysis Limited, London: 2007 CENTER FOR STRATEGIC & INTERNATIONAL STUDIES FREEMAN CHAIR IN CHINA STUDIES

5 Page 5 FREEMAN FACTS: Renewable Energy in China 1. China is the world s no. 1 renewable energy producer in terms of installed generating capacity. 2. China is the 2nd largest investor in renewable energy after Germany, spending $10 billion in 2007, which is about 7% of the world s total investment in green energy. 3. China s renewable energy consumption in 2005 was equivalent to 166 million tons of standard coal. 4. China s clean technology market is predicted to be worth $186 billion by 2010 and over half a trillion dollars by By 2020 China aims to have 15% of total energy consumption in renewable sources, requiring a further $398 billion in investment. Sources: Bloomberg, Reuters, The Climate Group, Worldwatch Institute, Xinhua The Freeman Report is an electronic newsletter produced monthly by the Freeman Chair in China Studies at the Center for Strategic and International Studies (CSIS), a private, tax exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions; accordingly, all views, positions, and conclusions expressed in this publication should be understood to be those of the author(s). Center for Strategic and International Studies 2007 THE FREEMAN CHAIR IN CHINA STUDIES Charles Freeman, Freeman Chair in China Studies Bonnie Glaser, Senior Associate Melissa Murphy, Fellow Savina Rupani, Program Coordinator and Special Assistant to the Freeman Chair Xiaoqing Lu, Research Associate Carl Rubinstein, Project Coordinator/Research Assistant See-Won Byun, Ai Ghee Ong & Lin Zhang, Research Interns If you would like to be added to the Freeman Report listserv, please FreemanChair@csis.org or visit About the FREEMAN CHAIR IN CHINA STUDIES The Freeman Chair in China Studies was established at the Center for Strategic and International Studies in 1994 to advance the study of China and to promote understanding between the United States and the countries of the Asia Pacific region. The Freeman Family Luther Freeman as a clergyman, Mansfield Freeman as a scholar-business leader, and Houghton Freeman as a corporate executive in a global enterprise have established a tradition of contributing to international understanding through practical experience in East Asia and China. The United States has a long-standing relationship with China and the countries of East Asia, which play increasingly important roles in future international economics, politics, culture, and security. In the diplomatic, public policy, business, and government fields, the peoples of both China and the United States will benefit from greater mutual appreciation and understanding through broadly based international exchange. The Freeman Chair s active policy-oriented agenda is dedicated to delivering informed public policy debates, expert briefings, and strategic policy recommendations on Greater China and East Asia to the diplomatic, policymaking, business, and government arenas. Current Research Projects China s domestic challenges and their consequences for U.S.-China relations and U.S. strategic interests The emergence of Chinese civil society and nongovernmental organizations China s HIV/AIDS crisis and its implications for U.S.-China relations Examining the economic, trade, and financial tensions in U.S.-China relations China s relations with key regions including Central Asia, Europe, and Africa and their implications for the United States China s military modernization and its impact on regional security U.S-China-Taiwan relations To learn more about our program and ongoing research projects, please visit our website at