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China — Nixon to now

When US President Richard Nixon embarked on his historic trip to China 40 years ago, he could not have imagined what his gamble would unleash.

The immediate diplomatic impact, of course, was to reshape Eurasia’s geopolitical balance and put the Soviet Union on the defensive. But the long-term outcome of America’s rapprochement with China became visible only recently, with the economic integration of the People’s Republic into the world economy.

Had Nixon not acted in 1972, China’s self-imposed isolation would have continued. Deng Xiaoping’s reform and opening of China to the world would have been far more difficult.

Four decades after the “Nixon shock,” no one disputes that China has benefited enormously Today, the impoverished and autarkic country that Nixon visited is history. Global reintegration has turned China into an economic powerhouse. It is the world’s largest exporter in volume terms, and is the world’s second-largest economy. China’s presence is felt around the world, from mines in Africa to Apple stores in the United States.

As we reflect on China’s remarkable progress since 1972, it is also an opportune time to consider how China continues to fall short in overcoming systemic obstacles to long-term success. Because China is widely regarded as a winner of globalisation, it is natural to assume that the country has developed the means to meet its challenges. But, while China has implemented policies to maximise the benefits of free trade (undervaluing its currency, investing in infrastructure, and luring foreign manufacturing to increase competitiveness), the country remains unprepared for deeper integration with the world.

One sign of this is China’s lack of the necessary institutions and rules. For example, China has become a significant player in providing economic development assistance (often tied to its strategy for acquiring natural resources). Its loans and grants to Africa have now surpassed those made by the World Bank. But China has no specialised agency in charge of international development assistance. As a result, its foreign-aid programmes are poorly coordinated and often seem counterproductive. Instead of earning goodwill, they are viewed as part of a sinister neocolonial plot to grab natural resources in poverty-stricken nations.

Another example is China’s lack of an immigration policy. Even though China is beginning to attract labour from around the world, it has yet to promulgate a comprehensive legal framework that would allow the country to compete for the most talented people or to deal with the complexities of international migration.

A third example is the absence of independent policy-research organisations. Owing to political control and inadequate professional development, government-run research institutions can seldom provide the high-quality, unbiased analysis of global issues on which sound policymaking depends.

Perhaps most importantly, two decades of rapid GDP growth have masked serious weaknesses on the economic front. Because China continues to favour state capitalism and discriminates against the private sector, it lacks strong private firms that can take on Western multinational giants. Except for Huawei, Lenovo, and perhaps Haier (which is nominally collectively owned), there are no private Chinese firms with a global footprint.

Until now, China has not paid dearly for this. Its role in the global economy is confined to low-to-medium-end processing and assembly functions. The most critical, sophisticated, and profitable parts of the value chain – research and development, product design, branding, marketing, service, and distribution – are occupied by American, European, Japanese, South Korean, and Taiwanese companies. China simply “outsources” these high value-added functions to the likes of Apple and Walmart.

Of course, China does have huge firms, but they are inefficient state-owned behemoths that owe their size and profitability to their legal monopolies and government subsidies. They may have the heft needed for global operations, but they lack the motivation to compete with world-class Western firms and are greeted with suspicion and fear around the world.

A China deeply embedded in globalisation also needs a large pool of talented people, comparable to the best that the West can produce. Today’s China lacks that pool. While tens of millions of Chinese young people display impressive innate abilities, the country’s system of higher education does an abysmal job cultivating their talents. For most, the curriculum is largely obsolete, and skewed toward rote learning of theory at the expense of basic analytical and critical-thinking skills.

Education in social sciences and humanities is particularly deficient, owing to lack of investment in these disciplines and excessive political control of curricula. As a result, Chinese graduate from colleges and universities having learned relatively little about the outside world in fields such as anthropology, sociology, international relations, comparative literature, and history. Unless China reforms its ossified system, the country will not be able to produce enough highly trained talent to compete with the world’s best and brightest.

None of these shortcomings – the lack of globalisation-friendly institutions, rules, corporations, and talent – is an insurmountable obstacle. The real question is whether China can remove them under a one-party regime that is hostile to the liberal values that inspire and underpin globalisation.

Nixon himself was probably not bothered by the nature of the Chinese regime four decades ago. The fact that the question must be addressed now attests to China’s astonishing progress since then. But it also shows that China’s long march toward global integration remains unfinished.

Minxin Pei is Professor of Government at Claremont McKenna College

© Project Syndicate