Sept. 28 (Bloomberg) -- The Chinese Communist Party will open its 18th congress on Oct. 10. Or not. It will reduce the number of members on its powerful Politburo Standing Committee from nine to seven. Or not. A back injury forced Vice President Xi Jinping, who is expected to succeed President Hu Jintao as the head of the party at the congress, to drop out of sight for almost two weeks. Or not.
The murkiness of leadership politics in the world’s most populous nation and its second biggest economy and military spender should give any observer pause. Together with the violent demonstrations, tit-for-tat diplomatic protests, and standoffs at sea that have marked the country’s dispute with Japan over some rocky isles in the East China Sea, it highlights the challenges of dealing with a rising and sometimes volatile China. It also should send a note of caution to those who would descend into China-bashing on the U.S. campaign trail.
The new Chinese leaders who will be anointed at the congress doubtless hoped that the Year of the Dragon would offer more promise. Instead, with the fall of former Politburo member and Chongqing party boss Bo Xilai, they’ve had to deal with the ugliest political scandal in a generation. And thanks in part to the fallout from the global financial crisis, they are coming into power with the slowest rate of economic growth since Deng Xiaoping first took the padlocks off China’s economy three decades ago. No wonder they’ve used nationalism to rally the public, and cracked down on information leaks that could further taint the top echelons of the Communist Party.
How should the outside world, especially the U.S., deal with a tetchy Chinese leadership that has a lot on its mind?
First, don’t hold your breath waiting for political reforms. Premier Wen Jiabao has called for reforms many times, but his has been a voice in the wilderness -- if indeed he is not simply, as one dissident put it, “China’s greatest actor.” The so-called Wukan model, named after a village in Guangdong province that won the right to hold elections with secret ballots after a series of protests, is not likely to spread quickly (especially because what the villagers actually gained is unclear).
At the same time, don’t give up on reform. “Mass incidents,” like those that took place in Guangdong, doubled from 2006 to 2010 to 180,000, and are animating reformers. Another hopeful trend: 30 years ago, the Politburo was all but devoid of members with a university degree; today, any member without one, or without a child who had studied overseas, would be the exception.
Second, expect China to try to muddle through its slowdown without resorting to a large stimulus package. The 4 trillion yuan ($630 billion) that it pumped into the economy in 2008 fed inflation and credit and property bubbles. China can undertake plenty of measures that would nudge the economy while helping its people -- putting more money, for example, into public goods such as health and education, where China lags global norms. Yet barring a protracted growth slump, the backgrounds of incoming General Secretary Xi Jinping or likely Premier Li Keqiang don’t suggest that they’ll come to work with much appetite for bold policy experiments.
Third, don’t let “strategic distrust,” to quote one recent prominent study, cast a pall over the U.S.-China relationship. China’s tough talk on territorial disputes and calculated displays of nationalist fervor have stirred concerns about its trajectory. (Less understandably, so has China’s commissioning of an out-of-date, former-Soviet aircraft carrier, its first.) Meanwhile, even as the U.S. pivot to Asia represents a necessary rebalancing of its military, economic and diplomatic resources after a decade of conflict in Iraq and Afghanistan, it also checks off the boxes on China’s most paranoid fantasies of encirclement and containment.
The distrust is magnified by China’s role as an economic punching bag in the presidential campaign. In their attacks on China for taking jobs from U.S. workers, both President Barack Obama and Republican nominee Mitt Romney have conveniently ignored some crucial details: Processing exports from other countries (such as Japan and Korea) accounts for about half of China’s trade volume, and the penalties and remedies they propose would probably do more to hurt consumers and U.S. businesses than to create good jobs.
The fact is, the economies of the U.S. and China are too intertwined to afford the real-world consequences of such dishonest debates. So are the two countries’ larger fortunes, from curbing greenhouse-gas emissions to curtailing the spread of nuclear weapons.
Defense Secretary Leon Panetta made that point in a speech last week to Chinese military students, in which he rightly called for greater military-to-military exchanges and invited China to join naval exercises off the coast of Hawaii in 2014. Such exchanges are a good way to dispel mistrust, and to create the kind of atmosphere where serious disagreements and issues -- cyberespionage, for example -- can be constructively addressed.
On trade, the U.S. needs to choose its punitive targets wisely. As David Chavern, the executive vice president of the U.S. Chamber of Commerce, told Bloomberg News yesterday in opposing Romney’s plan to designate China as a currency manipulator, “Picking fights with trading partners probably isn’t the best way to have expansion of the global trading system.”
If you want Americans to use more clean energy, for example, a better approach than whacking the Chinese for subsidizing cheap solar panels might be to conclude a clean energy trade agreement. And when possible, the U.S. should bring other parties into its trade disagreements with China, using the World Trade Organization to pursue complaints while also giving it the resources to resolve them more speedily. Such an approach would allow the U.S. to tap the support of China’s other trading partners (who often share the same complaints) and reinforces the rules-based consensus on behalf of international trade (which China’s leaders can then use to sell difficult concessions back home).
There are plenty of historical analogies about China’s remarkable rise, some of which lead to more alarming predictions than others. At this critical juncture, the best way to keep the worst from coming true is to cut China some slack.
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