250 years of US trade strategy for China

Criticising the CIA report in later years, experts dismissed the agency’s defence that “estimates of developments in China over the next 15 years are fraught with unknowables.”

Instead, the report’s critics, expecting the CIA and the specialists it consulted to have got closer to the mark, reasoned that the inputs on China in the report had been likely sourced from consultants influenced by the then prevailing narrative that the world was converging around the US values. But the CIA was not alone in grappling with “unknowables” in its estimates on Chinese communism. In fact, scholars and academics have for decades warned the establishment in the West of getting it totally wrong when it came to “knowing” China.

The problem it seems is much more than the Western understanding of China being fraught with unknowables. As some Western experts have argued, the US relationship with China must be understood in the context of the world capitalist system. The US needs China today for roughly the same reason as it needed China 250 years ago when the signatories to the Declaration of Independence backed the Empress of China’s voyage to China, then under the Qing dynasty. The only difference being two-and-a-half centuries ago the new America was in search of new overseas markets, while more recently, what the world’s number one economy wants from communist China is cheap labour and cheap resources. As the Hong Kong Maritime Museum exhibition explains: “Inspired by the success of Empress of China’s first voyage, more American merchants began to invest in long-distance voyages despite the risks. The trade fever also stimulated the growth of capitalism as financiers began selling shares to investors to finance long-distance trade ventures.”

Likewise, as Jason Hickel, professor of economics, and Dylon Sullivan, fellow with the Royal Society of Arts, have recently argued, from the early 1980s to 2010s — the period when China opened up and practiced market reforms and opened up to the Western investment and trade — such capital accumulation arrangement was welcomed in the global north as the perfect way of ensuring high profits for the multinational firms that dominate global supply chains. Hickel and Sullivan offer two key reasons for the West’s increasing opposition to China in recent times, especially since 2010.

First, over the past two decades, especially since the early 2010s, wages in China have increased quite dramatically. Around 2005, the manufacturing labour cost per hour in China was lower than in India, less than $1 per hour. In the years since, China’s hourly labour costs have increased to more than $8 per hour, while India’s are now only about $2 per hour.

Indeed, wages in China are now higher than in every other developing country in Asia. So, higher wages in China — though good for Chinese workers as these positive changes have amplified their bargaining power — pose a severe challenge for foreign (Western) capital.

“Higher wages in China impose a constraint on the profits of Western firms that operate there or that depend on Chinese manufacturing for intermediate parts and other key inputs,” Hickel and Sullivan have argued.

The second element that’s driving US hostility towards China is technology. China has used industrial policy to prioritise technological development in strategic sectors over the past decade, and has achieved remarkable progress. It now has the world’s largest high-speed rail network, manufactures its own commercial aircraft, leads the world in renewable energy technology and electric vehicles, and enjoys advanced medical technology, smartphone technology, microchip production, artificial intelligence, etc. “The tech news coming out of China has been dizzying. These are achievements that we only expect from high-income countries, and China is doing it with almost 80 per cent less gross domestic production (GDP) per capita than the average ‘advanced economy’. It is unprecedented,” according to Hickel and Sullivan.

How and why the West got China wrong? Without going back too far into the past, let’s focus on the past 10 years. In May 2021, the Harvard Business Review (HBR) carried an 8-page special feature, entitled ‘What the West Gets Wrong About China’. The core argument put forward by the HBR was: “Many people have wrongly assumed that political freedom would follow new economic freedoms in China and that its economic growth would have to be built on the same foundations as in the West.”

In March 2018, The Economist, carried a lead article, ‘How the West got China wrong’. It argued that “(The West) bet that China would head towards democracy and the market economy. The gamble has failed.”

Two years before The Economist claimed the Western gamble that communist China would head towards market economy-led democratic polity had failed, Stein Ringen, a Norwegian political scientist and the author of The Perfect Dictatorship: China in the 21 st Century, scornfully dismissed all those dreaming about seeing “a democratic China.” Ringen specifically ridiculed former US President Bill Clinton — credited for facilitating China’s entry into the World Trade Organization — who once claimed: “The more we bring China into the world, the more the world will bring freedom to China.” Ringen argued, “The Western misunderstanding of Communist China has been called ‘the liberal myth’. With our mindset and experience, it is almost impossible to grasp that a country can fail to open up politically when it opens up economically.”  

On the other hand, reacting to various anti-China predictions over the past decade — such as the ‘China collapse’ theory, ‘China hard landing,’ Covid is China’s Chernobyl moment’ and the ‘end of CPC rule’ etc. — a Chinese commentator put forward the West’s ideological bias and the limitations of western political science theory as the two main factors why western predictions on China have been mostly wrong. In the opinion of Yang Sheng, “The wrong predictions about China in the past have shown an interesting trend of western understanding of China: From downplaying China’s development and exaggerating the problems that China has, to recognising the fact of China’s rise, and now to the anxiety of how to deal with a powerful China with a unique political system and culture that is very different from the West.”

The past

In August 1784, the arrival of the American merchant ship Empress of China in Canton (now Guangzhou) — the only port city in China’s south which the Qing dynasty rulers permitted foreign (western or white) “barbarian” traders to do commerce — was hailed as the launch of a great trade relationship between China and the US by the young nation of Americans. It is a well-known historical fact that the six-month-long voyage from New York to Canton was an important commercial voyage in search of opportunities and richness in less than a decade of the US Declaration of Independence in July 1776 and a year after the end of the revolutionary war with the signing of the Treaty of Paris in September 1783. 

However, it is important to note — a fact generally not told to us — that the Empress of China was not just a trade expedition, it was the “Chinese dream” of a just-born nation of merchants and capitalists. The Empress of China carried the commercial ambitions of the new nation.

The North American colonial merchant’s opposition to the British economic strategy of colonisation led to the American War of Independence. The Americans, confronted with post-war economic depression, adopted overseas trade amongst several solutions to revitalise the economy. As explained in an exhibition on The Dragon and the Eagle: American Traders in China — A Century of Trade from 1784 to 1900, in the Maritime Museum, Hong Kong: “The eagerness for trading opportunities and the prospects of wealth from the Far East encouraged American merchants to set off on voyages to China, and so they sailed to distant shores to the other side of the world to chase their dreams.”

In February 2023, on the occasion of 250 years of the date when Empress of China finally set sail for Canton on a wintry day in February 1784, James Carter, a professor of history and author of three books on China’s modern history, described the first American voyage to China as the “beginning of US-China trade.” Emphasising the spirit of American capitalism, Carter observed: “The Empress of China carried the commercial ambitions of the new nation. Not only was her journey officially chartered by the Continental Congress, but she had the financial backing of the most powerful men in the freshly united US. The backer[s] of the Empress of China were all signatories of the [Declaration of Independence] … This was a private enterprise but a national priority.”

The present

Today, 250 years after the US launched its trade relations with China, the US views China as its primary competitor, or “pacing competitor.” The US-China bilateral relationship has become fraught with unprecedented rivalry and hostility. Besides, the world’s two largest economies are locked in a struggle over trade, technology, security, and the global order. However, in comparison, in August 1784, when the Empress of China arrived in Canton, China was still under the Qing dynasty, and the US had been in power for less than 10 years since the Declaration of Independence was issued, and the Paris Treaty recognising American independence had been signed less than a year earlier. At that time, the US had neither a navy nor much international standing, yet it already harboured a “China dream.”

So what went wrong in the unfolding era? Before we look at what scholars in China are telling us about what went wrong in the US-China relations development trajectory, let us be clear that the issues at hand — that is America’s 250 years and the two-and-a-half centuries of US-China bilateral relations — have been a hot topic in the Chinese press and on social media for several weeks now. Meiguo jianguo 250 nian: fenqi yu xiwang jiaozhi (250 Years of American founding: A blend of divide and hope), reported China Daily; Meiguo ‘duliri’ qingzhu: yanhuo beihou de duili yu fenlie (The US Independence Day celebrations: The conflict and division behind the fireworks),” said Xinhua News; 250 sui de Meiguo: neng shengri kuaile ma (Can America, which is 250 years old, have a happy birthday?) asked Beijing News. Interestingly. What is common to all the media commentaries cited above is a definite negative connotation about the US — the ‘declining hegemonic power at 250’.

Some commentators in China have highlighted the fact that during his recent state visit to China, US President Donald Trump mentioned the Empress of China at the state banquet hosted by the Chinese leader Xi Jinping. Significantly, while Trump’s reminiscing about the first trade voyage was interpreted by the international media as meaning trade opportunities, as pointed out in a Chinese article “China’s leadership saw in it a threat to the Chinese economy”. The Chinese article also re-published a South China Morning Post (SCMP-Hong Kong) four-point changing “assessment” of China by America during the past 250 years. According to the original article in SCMP, in the 18th century, the US viewed China as a trading partner, a huge market that represented the dreams of American merchants; In the 19th century, it viewed China as a “civilisational object” and hoped to bring Western civilisation and Christianity to China; in the 20th century, the US viewed China as a “partner”. From Sun Yat-sen to Chiang Kai-shek, and then to China after the reform and opening up, the US believed that China will eventually move towards a free market and a democratic system, becoming a stakeholder in the international order. And in the 21st century, the US views China as a “strategic competitor”. It has finally acknowledged that China will not follow the development path envisioned by the US, but has instead developed a different model of modernisation.

The future

Partly agreeing with the SCMP assessment that the biggest American miscalculation was believing — especially from (Bill) Clinton to (George) Bush and (Barack) Obama — that China would eventually become “another America,” a Chinese analytical commentary observed that in reality, “what has truly changed is not the ‘shattering of the American dream,’ but rather a shift in the balance of power between China and the United States.” The commentator points out that in 1978, China’s GDP was 5 per cent of that of the US.

Today, according to purchasing power parity (PPP), China has surpassed the US. In terms of manufacturing scale, China accounts for more than 30 per cent of the global total, while the US accounts for about 15 per cent. The world’s largest industrial nation is no longer the US. 

It is in this context that even China’s most hardline critics of the US policy towards China, despite admitting that Trump’s visit in May did bring in a sort of stability in their turbulent bilateral relationship, are asking how sustainable this so-called stability is. Zhang Zhikun, China’s most well-known anti-America voice, recently observed in his column: “The shift in Sino-US relations from a previously turbulent state to the current trend towards ‘stability’ is not due to a change of heart by the US authorities, but rather due to the intense struggle between the two countries. The reality is that, based on a comprehensive and systematic containment and encirclement of China, the Trump administration launched an unprecedentedly fierce economic and trade war against China, forcing China to fight back.”

Numerous Chinese media analyses and commentaries have emphasised China’s determination to fight back against the unfair trade practices and attempts by foreign powers to block China’s economic growth, in particular since the West’s forceful entry into China’s shores. It is exactly how China today sees the Qing rulers’ refusal to entertain the first formal British diplomatic mission to China in 1793. To which, Peter Auber, one of the participants, had remarked: “(Diplomatic) mission had been received with the utmost politeness, treated with the utmost hospitality, watched with the utmost vigilance and dismissed with the utmost civility.”

Like in the late 18th century and thereafter, when the US needed China for its trade and resources, in the opinion of some Chinese scholars the US today needs stability in its trade relations with China. “Economically, it needs necessary trade and economic exchanges with China; otherwise, American farmers and large capitalists would lose many businesses. It needs China to continue supporting the dollar order; otherwise, a de-dollarization movement would severely impact the dollar-centric financial order, further exacerbating the US economic situation. The US also needs China to maintain stability in its geopolitical security strategy; otherwise, whether it targets Taiwan or provides large-scale support to Iran or Russia, the US would face unbearable consequences and an unprecedented strategic crisis,” a Chinese scholar recently wrote.

With Chinese President Xi Jinping having accepted Trump’s invitation to visit the United States on September 24, the Chinese leader will be carrying with him the same spirit to fight foreign pressure as was displayed in 1784 and in 1793. The same spirit had inspired a Qing official, Lin Zexu (1785-1850), who is now celebrated in China as a national hero to wage the Opium War. Mao Zedong described Lin Zexu and Lin’s cause as the beginning of the Chinese people’s struggle against imperialism. Xi Jinping draws inspiration from Lin Zexu, and has notably kept items and texts honouring Lin’s legacy — such as a poem praising him — close to his workspace as a symbol of national resilience and defiance against foreign pressure. 

In conclusion, many scholars in China believe the “China dream” of the US over the past 250 years has not been about defeating China, but about China ultimately integrating into the US-led international order.

Today, however, the greatest challenge facing the US is not a China that has not integrated into the western system, but a China that is deeply integrated into the global economy while maintaining its own political system and development path, and possessing the long-term competitive capability to rival the US.

This structural change is the fundamental reason for the protracted strategic competition between China and the US.