RUDYARD GRIFFITHS: Huiyao Wang, thank you so much for coming to Toronto. It’s great to have you here as part of this debate.
I want to get your views on why you think China-U.S. relations at this moment are in a period of tension. What has been the catalyst for that? What’s brought this whole situation about?
HUIYAO WANG: Thank you for having me. I think we have seen that for the decades China has been open, it has been gradually increasing its economic influence. It’s now become the second-largest economy, and so many U.S. companies are working in China. So the interests of both countries are so much more intertwined than ever before. But, as the mutual interests deepen, there’s bound to be some disagreements, problems, and frictions.
But I think that the current situation is led by President Trump, who took office and pursued an America-first approach, and that actually started this trade tension. Since 2001, China has joined the World Trade Organization, and its GDP has gone up almost ten times. It is probably going to be the largest economy in the world in ten to fifteen years’ time. So, I think there is also an issue adjusting on both sides.
Also, China has readily participated in, fallen in love with, and strongly defended the multilateral system, while the U.S. is pulling out of a lot of agreements. His first day in office, President Trump pulled out of the Trans-Pacific Partnership, and then the Paris Climate Change Agreement and quite a few United Nations organizations — such as UNESCO — and he has threatened to pull out of the WTO as well. So, I think there’s a lot of points-scoring now.
But I think that another big reason for the tensions is that the U.S. looked at the normally low trade deficit and said, “Oh, there’s a $375 billion trade deficit.” But they may not have realized that half of that was exports by American or foreign companies. So, China has the appearance of that but may not necessarily have the benefit. Also, the service trade is not counted in that number. China has three million tourists visiting the United States, spending $30 billion, which is not counted. China has half a million students in the United States, contributing another $20 billion; that’s also not counted.
It’s also the effect of a lack of communication.
RUDYARD GRIFFITHS: Let’s talk about that. Is there frustration in China about the extent to which China’s demonstrable commitment to a lot of multilateral institutions is underestimated? The Paris Accord, the Law of the Sea: you can go on and on and look at these different multilateral bodies that the United States has either withdrawn from or criticized. But it often seems that China, at least in the West, gets painted as being as unilateral as the United States. Why is that happening? And how do people in China interpret this?
HUIYAO WANG: I think there’s quite a bit of a culture difference involved. I think China, first of all, pursued a different development model than the Western countries. I think there was some early expectation that China would converge with the Western model, but that obviously has not been the case. As Deng Xiaoping said, it doesn’t matter if it’s a white cat or a black cat, as long as it catches mice. So, if its own model works for China, well, China maybe should stick to that.
And then China in the last four decades has been able to lift 800 million people out of poverty. China has contributed to the world and is now the second-largest donor to the United Nations. Also, China has set up the Asian Infrastructure Investment Bank [aiib] with ninety-five member countries, including a lot of Western countries, though not the U.S. or Japan. So China is doing a lot of multilateral efforts, particularly its Belt and Road Initiative. China has actually spent $40 or $50 billion already on that in a number of countries.
RUDYARD GRIFFITHS: I want to ask you about Belt and Road, because it’s an interesting facet of this debate in terms of how an issue can be viewed in two very different ways. There’s an argument that the Belt and Road Initiative is an example of multilateralism, that 126 countries have signed co-operation agreements, that China is spending hundreds of billions of dollars to build this infrastructure, that it’s increased trade, it’s lowered shipping times.
Yet there’s a perception in the West at times that this is a hostile move, that China is practising this “debt-trap diplomacy” to ensnare these countries in a vassal-like relationship. Again, how can two such opposite things be true at the same time?
HUIYAO WANG: First of all, Belt and Road only started about five or six years ago. So it will take time for Western countries to gradually realize its benefits. But since the 2008 financial crisis — probably even since the Marshall Plan to build up Western Europe after World War II — there’s been no major stimulus from the world to help the economic growth of developing countries.
China has benefited from other countries in the past. All countries come to China. So, for the last four decades China has cultivated and developed this capacity for infrastructure, which is now probably the most advanced in the world, with high-speed trains and one billion smartphone users, and is now becoming a cashless society. So that kind of newly developed expertise could be shared with the vast number of developing countries. Just like a venture capitalist, China is putting up the seed money. And let’s have an A round, a B round, a C round. Let’s all get together.
So the principles of Belt and Road are that it should be jointly consulted, jointly built, and jointly shared. It is actually designed around a multilateral approach, but I think it probably still needs more help. I’m glad to see that the second Belt and Road conference in Beijing just last month had forty heads of state attend and 150 countries represented.
But I think there’s a point there; we could make it more multilateral. For example, we can more involve the World Bank, the Asian Development Bank, the African Development Bank, and all the other banks. We can also get the Organisation for Economic Co-operation and Development and the Paris Club involved. I think, first of all, we should not take a position on that at the very beginning, because then why would so many developing countries participate?
We’ve been lacking that kind of a stimulus package since the financial crisis. So, it’s probably a shot in the arm of the global economy that China makes these injections of capital and of infrastructure expertise that could link the world. According to the World Bank, Belt and Road could increase the GDP of the world by 0.1 percent and probably cut down by 1 to 2 percent the cost of trade among the countries.
So, Belt and Road is a very good initiative. It’s not perfect, of course; it still needs a lot of improvement. It’s just started. That’s precisely why we need more countries to participate. I’m glad to see Italy as the first G7 country participating, and Switzerland, Luxembourg, and Greece have just come in. I think that if more developing countries, and the United States, join hands with China, Belt and Road could be the impetus for the next generation of global stimulus, to carry the world into a much better, more prosperous future.
If we fight on that, if nobody can initiate the plan unless the U.S. does, then the world will lack an engine. China is already part of a global engine.
RUDYARD GRIFFITHS: Do you think that that is really the core of this debate? That the United States is feeling increasingly uncomfortable and anxious about losing its economic and military global supremacy? Something it has enjoyed now, unbroken, since the fall of the Berlin Wall in 1989.
HUIYAO WANG: It could be. I was at Harvard many years ago, at the Kennedy School, and the professor and founding dean Graham Allison proposed a very interesting theory of the Thucydides Trap. He just spoke at my think tank about a month and a half ago. He said that there could be competition between a rising power and an existing power, but that there are many ways of peaceful coexistence. It doesn’t have to be a strategic rivalry. If the U.S. perceives China as a strategic rival, that sends the wrong signal. They should be co-operative; probably a co-operative rivalry. But I think in the end that if the world economy is benefiting from Belt and Road, then China should really get more involved with the Western countries and think about how to improve the initiative. Make it work. Like the Asian Infrastructure Investment Bank, Belt and Road has ninety-five member countries. India is the largest recipient, and Canada, the U.K., Germany, and France all are member countries. So if AIIB can have this involvement, why not the Belt and Road Initiative?
Also, there’s a lot of talk about debt traps, but we just had a new study by the Rogan Group, basically saying there aren’t many concrete examples. So there are a lot of theories that I can see, you know, about intellectual property theft, technology transfers, debt traps. But please give me a concrete example, because we haven’t seen many of them.
RUDYARD GRIFFITHS: Are you surprised at the extent to which it seems that in many of the current negotiations going on between the United States and China there’s an assumption on the part of the United States that China needs to adopt its model? In other words, whatever reforms of processes that the United States has, China has to have these as well before you can have “a deal.” How is that interpreted in China? Because it seems like an extension of a very troubling history between Asia and the rest of the world, where in the past, whenever the West could, it would not only impose its values on Asia but also force China into a position of subservience. Are we repeating bad habits of the past?
HUIYAO WANG: It actually worries me. I don’t exclude that maybe there could be people thinking in racial ways. For example, recently, a U.S. State Department official, Kiron Skinner, said there could be a clash of civilizations, and it’s the first clash of Caucasians versus Asians. That sounds very racial, certainly coming from an official of the U.S. government. So, I’m very, very taken aback by that.
I think we should probably avoid this Cold War mentality. We are living in a much-developed world now; not seventy or eighty years ago when every country was isolated, everybody was self-sufficient, and everybody was misinformed or couldn’t access information. Now everybody is well informed. The world is so intertwined, and we are so dependent on each other. Seventy or eighty years ago, there was no value chain. Now there’s a full-fledged value chain. We can’t live without each other. Like it or not, we have to live together.
I think this is why we haven’t seen any major war in the last seven decades. Trade — goods movement, capital movement — has supported this prosperous world. We want to keep that with our new initiative; we want to have a new drive and new impetus. Now, after getting help from all the other countries for the past four decades, help from Western countries and the liberal order system, it’s time for China to contribute. China doesn’t want to take the U.S.’s position or be the policeman of the world. China’s military budget is only a quarter of the U.S.’s. The next eight countries’ military spending combined is not even equal to the U.S.’s, so we shouldn’t worry that much.
RUDYARD GRIFFITHS: Final question: Do you see this current state of tension between China and the United States as something that’s transitory, that has to deal with the personalities that are here right now, or are you concerned that we’re creating distrust and real damage to the relationship that could have repercussions well into the future?
HUIYAO WANG: I think it will be very devastating if U.S.-China trade relations are not properly handled and solved. You see that in today’s market the U.S. is tumbling and China, of course, suffers greatly. The business communities of both countries, in particular, cannot afford poor relations. General Motors and Ford sell more cars in China than in the United States. China is Apple’s second-largest market, and Walmart purchases 20 percent of goods from China to supply U.S. supermarkets. So it’s really not in the interest of either government to fight this trade war.
I think the multinationals have a lot of legitimate concerns, but China just passed the foreign investment law in March, forbidding any technology transfer. Any Intellectual Property Rights violations will be severely punished. No government should be allowed to do any of these kinds of activities. Foreign companies should be treated the same as Chinese companies. So, you see, China has already taken a lot of actions to correct that misconception. There may have been some incident that has caused that experience. But, I think in general, China is very sincere about fixing this.
Even with President Trump, with this threat, China is still open. Because you have to be responsible as the second-largest economy. You’ve got to think about the world. It’s not just a matter between China and the U.S. It’s actually going to affect the whole world. If the two biggest economies don’t get along, all the other countries suffer. Then all the blue-collar workers and all the people around the world suffer.
So I think it’s really the responsibility of the U.S. and China to get along on those issues. And if trade goes on, the prosperity continues, and world economy growth continues, then we can really fight the setbacks of globalization. We can really fight all those issues, such as climate change and terrorism. I think there will be severe consequences if we don’t handle this issue properly.