Do not fear going forward slowly; fear only to stand still.
—Chinese proverb
ON A BRISK Monday morning on the last day of March 2008, President Hu Jintao of China emerged from the high walls of Zhongnanhai, the eerily quiet leadership compound next to the Forbidden City in Beijing, for what should have been a moment of unfettered national joy: the lighting of the Olympic torch.
Like most grand, choreographed political events in the Chinese capital, this one was scheduled to take place in the center of Tiananmen Square, the place where Mao had announced the creation of the People's Republic, where the home of the National People's Congress, the Great Hall of the People, stands, and where, in 1989, tanks and troops brutally faced down pro-democracy demonstrators. Just days before the start of the Games, Tiananmen had been awash with thousands of tourists enjoying unusually clear spring days. Both the Chinese visitors from the provinces and the foreigners who were flooding the city were taking one another's picture in front of Mao's portrait and lingering near the Olympic countdown clock, which ticked away the milliseconds until the opening ceremonies began, scheduled for the auspicious date of 8/8/08, at 8:08 p.m.
Even those who lined up for this most somber of Chinese rituals—the fast walk through Mao's mausoleum to view the embalmed founder of the People's Republic, who resembles a ghoulish waxy replica of himself at Madame Tussauds—were jovial and happy. “Olympics a great thing!” one Chinese villager told me and one of my sons a couple of days before the ceremony, as we shuffled along in the line to see Mao. “China is back!”
More than a billion Chinese seemed to agree. They knew that by hosting the Olympic Games China could declare an end to 150 years of perceived humiliation, years in which Beijing's national power ebbed while Hong Kong and other lucrative trading ports were surrendered to the British and the Americans. This disgrace was followed by the worst subjugation of all, a brutal occupation of the country by the hated Japanese, historic rivals in the centuries-old struggle for domination of Asia. But the Olympics also marked a final burial ritual for the Chinese Revolution. Mao's Communist vision had been embalmed with him long ago, of course, replaced in the 1980s by such slogans as “To Get Rich Is Glorious.” Over the past two decades the government edged toward its own national variant of this Chinese paean to individual accomplishment: To restore Chinese influence around the globe is glorious, too.
Yet for Hu Jintao that morning in Tiananmen, the lighting ceremony was far from joyous, and the tension was evident on his face. For three weeks Hu and his colleagues inside Zhongnanhai had been preoccupied by what Chinese leaders viewed as a mortal threat to the state—one that came from within.
In Tibet, the “autonomous region” that had been brought under Chinese Communist control during the 1950s, a group of monks and other dissidents were staging a brilliantly timed protest. For decades the Chinese government had attempted, with considerable success, to dilute Tibetan culture, limit religious freedom, and flood the region with ethnic Han Chinese—all part of an effort to tamp down separatist sentiment in the region. There had been violent protests in Tibet before. As a relatively young Communist Party chief in the region in 1988, Hu Jintao himself gained the attention of the party leadership when he successfully engineered a crackdown on a Tibetan protest and imposed martial law.
This time, however, martial law wasn't an option. The Tibetans had timed this uprising for maximum embarrassment of the Chinese leadership. Seven years before, to win the bid to host the Olympics, Beijing had agreed to vaguely worded commitments to improve its behavior on human rights. Everyone knew those commitments to the International Olympic Committee were unenforceable; no matter what the Chinese did, the Games would go on. But some Tibetans were clearly trying to goad Hu and his associates to initiate mass arrests—or worse—that would prove the emptiness of their promise. The protesters wanted to present Hu with the ultimate bad choice: Let rebellion spread, or risk a televised, or cell-phone-recorded, crackdown that would make a mockery of all of China's pre-Olympics propaganda about the country's “peaceful rise.”
Already the grainy images on the Internet of burning vehicles and reports of how many protesters died—the government said 19, the Tibetans said 140—were prompting a few world leaders to hint that they might boycott the opening ceremonies, which were just months away. The Chinese government wasn't helping its own cause. In Beijing a few days before the torch lighting, the language the government used to describe the Tibetan protesters seemed as though it could have been written by Mao's speechwriters. They were “splittists,” the government said—a phrase meant to evoke the centuries-old fear of the country being torn apart and weakened. But the toughest words were reserved for the Dalai Lama, long in exile in India. The Chinese described him as micromanaging the whole uprising. He was “a jackal in Buddhist monk's robes, an evil spirit with a human face and the heart of a beast,” the government claimed. It went on, “We are engaged in a fierce battle of blood and fire with the Dalai clique.”1
This wasn't exactly in the script for the run-up to the Olympics. Instead, it was a raw display of power by an authoritarian regime that had changed less than it wanted the world to think. It was an ugly scene of Old China impinging on the manicured, Olympics-ready look of New China. So by the time Hu finally appeared that Monday morning, Tiananmen Square had been cleared of all those happy tourists looking for the countdown clock. Only those specifically invited could get inside the security cordon: Chinese leaders, prominent business tycoons, the acrobats, and the Chinese children in matching Olympic outfits chosen for their uniformly adorable look. The few Tibetans in the square were part of a group of ethnic-minority dancers. Just in case their cousins tried to crash the party, the subway entrances and side streets were cut off by paramilitary police.
A press release issued to foreigners declared that the torch lighting in the square had been marked by “long ovations,” a curious claim since the release was handed out an hour before the event began. But for the Chinese leadership there was only one measure of success that morning: making sure that the picture of Hu Jintao lighting the torch would be beamed out to television broadcasters around the world without a single voice of dissent echoing in the distance. None was heard. That would change as soon as the torch relay sprinted into a world beyond Chinese control.
THE TORCH LIGHTING was supposed to represent the triumph of New China over Old China. Behind the fireworks—both the real ones and the electronic simulations that enhanced the effect on television—the Chinese hoped the Games would speed China's transition toward a new era devoid of Mao's revolutionary fervor and filled with a renewed sense of nationalism and pride.
Beijing's timing seemed nearly perfect. China was awarded the Olympics just after the turn of the millennium, at a moment when its historic rivals—the Japanese—were in economic and political retreat throughout Asia. Then came 9/11 and America's distraction in Afghanistan and Iraq. A new generation of Chinese leaders, led by Hu Jintao, the economic technocrat with an authoritarian edge, saw in these events a huge opportunity.
Hu had been something of a mystery to the world when he first became the general secretary of the Communist Party in the fall of 2002. He seemed mild-mannered, partial to speeches that were boring and colorless even by Chinese standards. But George W. Bush had welcomed his arrival. As Condoleezza Rice conceded to me soon after Hu took power, Bush and the aging Jiang Zemin, the Chinese president who preceded Hu, “never had much in common, and could never get a real conversation going.” Hu and Bush were of the same generation and could talk business, she thought. As another of Bush's top China hands told me after sitting in on many conversations between the two presidents, “When he first arrived, Hu looked to us like a technocrat who was only focused on economic growth. And he is—if you can imagine a progressive, economically literate technocrat who must have read a lot about Stalin.”
But Hu could never have anticipated that China's great rival for influence in the Pacific would distract itself for seven years on the other side of the earth. Then a decade after the Asian financial crisis, the tables turned. The United States, its investment houses reeling, its property market in a free fall, found itself more dependent than ever on Chinese capital. China was bound to gain leverage as it became richer. But no one on either side of the Pacific could have imagined the speed at which fortunes would reverse.
Today the Chinese sense that they rank among the biggest winners of the Iraq War. First they avoided getting sucked in. Then they saw an opportunity in our preoccupation in the Middle East. While we armored Humvees to survive roadside bombs, they were building a new generation of factories to survive the next era of global competition, creating jobs for tens of millions of young people pouring out of the countryside every year. While we spent $800 billion in a war with an indeterminate strategic end, they built a gleaming new airport in Beijing and a magnetic levitation train in Shanghai. “You gave us enormous running room,” one academic who is close to Hu said to me in Beijing, as Olympic fever spread.
The Chinese are a long, long way from becoming a superpower. There is too much poverty, too much illiteracy, and too little rule of law to see that day on the horizon. But they used our distraction in Iraq to fashion a sphere of influence unlike any they have enjoyed for hundreds of years. Chinese foreign aid financed the building of a new capital in East Timor, putting one of Asia's newest nations in China's orbit. China's state-run firms have invested in big energy projects in Indonesia, and struck deals in the Sudan and many other countries in Africa that they hope will provide them with exclusive access to oil. From their trade surplus, they built a “sovereign wealth fund” to invest around the world, just as oil-rich states have invested their windfalls.
None of this happened under the radar. Washington was aware of it all, but never really grappled with its strategic implications. That was fine with the Chinese leadership. You can imagine what Hu Jintao wanted to say to George Bush: “Someone has to democratize the Middle East, and we can't think of anyone better than you. Keep at it, and let us know how you are doing in fifteen or twenty years.”
Fifteen to twenty years is China's target. During that time its economy is expected to rival Japan's in size. Meanwhile, what better way to keep the Americans out of the way than to have them mired on the slow-growth side of the world—and preoccupied with the prospect of another act of terrorism?
This is the new, unspoken China Doctrine: Keep the Americans busy—somewhere else. It is not written down anywhere, but it's visible on skylines across Asia and it serves as the subtext of every conversation with Chinese business executives and government leaders.
It is a doctrine fueled by a robust economic strategy, borrowed from Japan after its own Olympic coming-out party forty-four years ago. Following the path carved by Sony and Honda, Hu Jintao's China intends to shed, ever so gradually, its reputation as the world's lowest-cost producer, while quietly moving up the ladder as a technological innovator, where the greater revenues lie.
How Obama handles a rising China is likely to prove far more important in the long term than how he organizes our departure from Iraq. For two administrations now, Washington has been engaged in a circular debate over whether Beijing is a “strategic partner” or a “strategic competitor,” and has been struggling to develop a strategy that recognizes the obvious fact that it is both. The only solution is what former defense secretary William Perry, who has spent a lot of time weighing the intentions of China's many competing fractions, calls “prudent hedging.”
“During the Cold War we assumed the worst-case scenario, and so did the other side,” Perry said to me. “It gets you into a psychology of endless competition, and an arms race. We may end up in confrontation with China someday, but let's not assume we will and make it inevitable.”
China is not seeking territory so much as a sphere of influence— and time to cope with other problems. Behind the Olympic spectacle, the country remains preoccupied by the huge challenges it faces at home, challenges that the leadership knows could easily derail the new China Doctrine. As Hu Jintao told George Bush the first time the two sat down for what approached an unscripted dialogue, when the Chinese look at their own rise, they see an era of huge risk.
The biggest single risk is that the Chinese economy, which has somehow avoided every major boulder in its twenty-year-long ride down a raging river, finally hits a big one. There was a reason the Chinese announced a $586 billion economic stimulus in November 2008, as the economic crisis spread. For the Communist Party, an end to the era of growth could quickly turn into a crisis of legitimacy.
When Americans heard during the opening ceremonies that Beijing had spent $43 billion to stage the Olympics, they had images of an unstoppable locomotive headed down the tracks to run them over. When the Chinese heard that figure, translated into yuan, they saw another jobs program intended to keep the country from running off the rails—part of Hu's effort to create 20 to 25 million new jobs a year as young Chinese stream into the coastal cities looking for new opportunities. Without those jobs, Hu told Bush in that first conversation, the social stability that allows China to grow—and, he might have added, keeps the Communist Party in power—would unravel. Americans were fixated on that shiny locomotive; Hu was worried about the decrepit trackbed. Americans think about the Pratt & Whitney factory that moved jobs out of the American Midwest to China's manufacturing coast; Hu thinks about the 300 million people in Western China who are living on fifteen dollars a month and are desperate for a piece of the Chinese miracle.
For Hu, replacing track, and adding new jobs, is not enough. To keep the growth going, China needs to add enough electrical generating capacity every year to power the equivalent of all of Britain.2 So even while the Chinese were shutting down factories around Beijing in a determined effort to clear the pollution from the air for the Olympics, out in the countryside they were adding a new power plant every seven to ten days—mostly coal-fired and inefficient. As soon as the Games ended, the turbines were flipped back on.
The Chinese were not eager to highlight those grimy facts during the Olympics. Instead they used the moment to persuade reporters and foreign leaders that the country had a newfound devotion to green technologies. They took visitors on tours of environmentally friendly buildings rising in Beijing and Shanghai and showed their experimental wind farms in Guangzhou, where China's electronics factories are concentrated just across the border from Hong Kong and Macao. They talked about a vision of China in 2020 and beyond, when an increasingly educated workforce will push the country into nonpolluting knowledge industries—designing software and developing alternative fuels and energy-saving urban designs.
It's an impressive plan, but Chinese leaders know there aren't enough windmill sites in southern China to generate anything close to the amount of power they need. As I drove up one spring morning in 2008 from Hong Kong into Guangzhou, I saw newly built coal-burning power plants kicking to life just to keep churning out enough power to light the new factories and housing complexes. (Anyone seeking to grasp the change in Guangdong should look at the famous painting of Mao, made just four decades ago, hiking with peasants as water buffalo grazed in the background.) Those factories and housing complexes are the product of one of the most successful antipoverty programs in modern history. Though the pace of growth slowed dramatically in 2008, local Chinese officials estimate that roughly 18 million factory workers are employed on the assembly lines in the factories just north of Hong Kong. Here's a sobering thought: That's a larger workforce of factory employees than in the entire United States.3
No wonder Hu is talking green in Beijing while building coal plants in Guangdong. He knows that alternative energy sources may create the illusion of an energy “revolution” that China craves, and ultimately needs for political accommodation with the West. But over the next twenty or thirty years, alternative energy sources are not sufficient to sustain the miracle. Western leaders who meet with him say Hu is quick to point out that when Britain and the United States went through their industrial revolutions, no one was demanding that they limit their efforts in order to meet environmental standards. China is willing to try, he insists, but he emphasizes the need for patience.
Hu's argument carried the day. For all the administration's talk of having the best relationship in history with the Chinese-working together on reining in the North Koreans, and most recently on mitigating the effects of the 2008 financial crisis—it was not until late in Bush's presidency that he began to engage the Chinese on the hardest challenges of the twenty-first century. We had a chance to think big with the Chinese—and show the world that we could work together on the two linked problems, energy and global warming, that will have the biggest effect on the prosperity of Americans and the growth potential of China. Yet Bush never fully engaged with the Chinese on the issues—perhaps because of ideology, perhaps because he feared the Chinese would use the talks to require environmental changes in the United States that could limit growth.
In short, Bush wasted precious years. Obama is now left with a huge opportunity—if only the political atmosphere in the United States, where China is equated with job loss, enables him to exploit it. Imagine that the new American president, in one of his first meetings with his Chinese counterpart, seizes the initiative with an opening like this:
“President Hu, we Americans are direct—probably too direct for your taste—but let me get right to the bottom line. If you keep building coal-fired plants and pouring factory and mining waste into your rivers at this pace, two things are going to happen. Califor-nians are going to be breathing your pollution—they already are— and we're going to be headed into a big problem. The protests and riots in your villages over kids getting sick are going to get worse-there were about 51,000 demonstrators in 2005, right?4 Sooner or later, this will result in a threat to the stability of the Communist Party. And it's one you can't solve by sending in the People's Liberation Army to shoot a few protesters.
“So here's an idea. We announce, together, a multibillion-dollar environmental cleanup project. Everything's on the table—our clean-coal technology, electric cars, wind farms—you name it, with the right protections on American intellectual property, of course, because this stuff is a lot more valuable than Pirates of the Caribbean. Now, I have to warn you, Congress isn't in a mood to pay to solve China's problems—not when you are running a huge trade surplus, and you might have noticed that Bush left me a trillion-dollar deficit, a bunch of which you've been financing. So you'll pick up most of the tab for this one by recycling those billions you've been building up selling stuff at Wal-Mart. It'll help close the trade gap, which is good for both of us. Maybe we'll even let developing countries join—good for your reputation, good for my image. Best of all, we'll have a common project to work on, which is a hell of a lot more than I have going with Putin. And each of us will have an answer to the right-wingers—those crazy generals in the People's Liberation Army and the cable television geniuses who want to prepare for the great Sino-American confrontation. That's a confrontation that, if we're smart about it, doesn't need to happen.”
My guess is that the Chinese would say nothing at first—other than “very interesting”—but in time the offer will have a clear appeal. How they respond might begin to answer the big questions that were left hanging as the Olympic athletes headed home from Beijing. The two most urgent were crystallized by John Ikenberry of Princeton: As Beijing plots out its “peaceful rise” with the same precision and insistence on total control that it charted for the Games, “will China overthrow the existing order, or become part of it? And what, if anything, can the United States do to maintain its position as China rises?”
It is a burning question for software engineers in Silicon Valley and financial analysts on Wall Street. But it was barely touched upon in the 2008 campaign. Wars in Iraq and Afghanistan are vivid and urgent. Iran is easy to vilify. Managing China—or, more precisely, learning to profit from China's rise—seems like a ripe topic for some slow-running congressional commission.
“Think about the two preoccupations in Washington today: countering terrorism and managing China's rise,” Joseph Nye, the Harvard professor and originator of the term “soft power,” told me one day in 2007. “You couldn't have two more different kinds of problems. It takes entirely different kinds of skill sets to handle each one—and we've put just about all our energy and money over the past seven years into the first. We've never gotten the balance right.”
THE TORCH that Hu Jintao held in his hand that brisk Monday morning in March 2008 in Tiananmen Square, with its sleek, sculpted red handle, was designed to symbolize New China, the China of innovation and bold new design.
Its cool lines topped with flame all but shouted, “We're hot, we're global, and everyone should step out of the way.” As Hu dipped the torch into the Olympic flame, no one was watching with more interest—or pride—than the freewheeling computer designers in Yao Ying Jia's laboratory at the Lenovo Corporation. At thirty-five, with a buzz haircut and graying sideburns, Yao is constantly on the search for the new—the new design, the hot new gadget. As he races from meeting to meeting, a small team of adoring acolytes moves with him, taking down his ideas. For the young, hip engineers working at Lenovo, success means establishing a new business model for the country. It means making Lenovo an innovator that can take on the best in Japan and the United States, and prove that China's contributions to the world of commerce can be grander than simply being the lowest-cost producer of almost everything. If Hu spends his days worrying about the threat from Taiwan and Tibet, Yao spends his days worrying about how to battle Apple and Dell.
In fact, he looks like he could be working at Apple or Dell, and that is quite deliberate. To get to Yao's R&D center from Beijing, you have to drive past the Summer Palace, the ancient retreat for Chinese emperors, with its lakeside pavilions and soaring pagodas. But Yao's laboratory was designed to evoke the Google dynasty, not the Qing dynasty. The atmosphere is Silicon Valley casual. Just outside Yao's meeting rooms, there is a giant pool table where his designers challenge one another in late-afternoon competitions. The walls are done in glass and sleek fabrics, with just a touch of Chinese accents, including a few decorative wooden doors that resemble those from the kind of charming but barely heated houses that used to dot the outskirts of the city here before it became a high-tech office park. Save for the perpetual Beijing smog, the view out the window might make you think you were in Santa Clara.
The workers clearly imagine that is exactly where they are. Moving between Lenovo's offices in Beijing and its other offices in Raleigh, North Carolina, and Yamato, Japan, Yao and his team of engineers and designers like to think of themselves as citizens of the Internet first and of China second. A distant second.
I discovered this when I casually asked Yao what he thought of the crackdown on the Tibetans, which was splashed across the front pages the morning we met. “We don't talk about politics much,” Yao said to me, sounding like a California entrepreneur who can't be bothered with a bunch of Washington guys and their petty power plays. “We've got too much to do.”
Yet whether Yao and his team acknowledge it or not, they are living out one of China's greatest political experiments—one testing whether their country is truly ready to go global. Just three years before, in 2005, as Hu was settling into his top post in the leadership compound at Zhongnanhai, Lenovo accomplished something almost no Chinese company had ever done before: It bought out one of the most famous industrial names of the West, the IBM personal computer division. With the purchase came the right to sell computers under the IBM name—at least for a couple of years—and the division's global network of design laboratories.
With only a few years to market computers under the familiar IBM label before the company had to survive using the Lenovo name—a combination of the company's old name, Legend, and novo, the Latin word for “new”—Yao and his team had to move fast to create an independent identity for their brand.
Quickly they settled on a strategy for recognition: the Beijing Olympics. The Games were all about showing the world the rise of a new, internationalized, innovative China—one that in just four decades had moved from the insular mind-set of Mao's Cultural Revolution to the sleek, tech-savvy world Yao and his engineers had created north of Beijing. It was the kind of unfettered capitalism that might send Mao spinning in his mausoleum.
Looking to showcase the company on the Olympics’ world stage, Yao's industrial designers saw a notice for a national competition to design an Olympic torch, with “Chinese characteristics.” This was their chance. Designing the next laptop took a backseat, briefly, to designing a torch. Out of 388 competing designs, Lenovo's entry won—a smooth, curved, distinctively Chinese handle (with the rubbery feel of a laptop computer's outer case), flowing upward into an ethereal representation of a traditional Chinese “lucky cloud.” It was designed to stay lit in a robust wind and a drenching rain.
“Pretty cool,” Yao said, handing me one of the prototypes just before the real torch began its six-continent, 85,000-mile journey. “You won't be able to look at it without thinking ‘China’ and ‘Lenovo.’”
TEN YEARS AGO, little of this would have been foreseeable—not the buyout of IBM's personal computer operations, not the pool table, not the Olympic torch. But the most interesting element of the Lenovo experiment—and the new challenge for Washington—is that no one seems to be directing it from the top of the Chinese power structure.
Everyone I spoke with at Lenovo insisted that buying up IBM's personal computer division was the company's idea, not the idea of some central planner from the Chinese government. It would be hard to convince many lawmakers of that in Washington, where every step the Chinese take is viewed as part of a grand plan to surpass American industry.
The whole buyout likely would have been doomed if it had happened just a year later, around the time that Dubai Ports World tried to buy the management contracts for some port operations in the United States. By then, Washington was in one of its episodic allergic reactions to foreign ownership of American assets. Democrats and Republicans alike screamed that America was outsourcing its security; it did not help that Dubai Ports World was an Arab firm, based in one of America's few allies in the Gulf, the United Arab Emirates. On television, members of Congress complained that the United States could never let foreigners run our ports. (One of the inconvenient facts of this deal was that the seller was a British company which had been responsible for the management of the ports for years.) Within weeks, Dubai Ports gave in and scrapped the deal.
Just a few months later, Lenovo ran into a similar, but smaller, firestorm. Carrying the Dubai experience to the next step, some members of Congress demanded that the State Department renege on a deal for 16,000 desktop computers purchased from Lenovo. The fear in Congress, supported by dubious evidence, was that Chinese authorities might have stuffed the computers with secret surveillance equipment that would send State Department communications straight to intelligence agencies in Beijing. After many trips to Capitol Hill, Lenovo's American managers defused the situation, and the deal survived, although the computers are supposed to be used only for nonsensitive material.
Taken together, however, the Dubai Ports World debacle and the State Department incident pointed to a huge challenge the Obama administration is going to have to face: Well into our second decade of globalization, Congress still can't think straight about global enterprises—especially those with Chinese or Arab roots. To members of Congress, Lenovo is first and foremost a “Chinese” company, even if it has morphed into an enterprise that is reaching beyond China's shores to buy up foreign laboratories, employing workers in the United States, and hiring American managers.
In fact, no one in Congress or in the Great Hall of the People has ever seen a company quite like Lenovo. Soon after the purchase of the IBM division, Lenovo's chairman of the board, Yang Yuan-qing, moved to Raleigh, North Carolina, setting up headquarters in the heart of America. Bill Amelio, the American executive whom Yang hired away from Dell, runs the company's day-to-day operations from Singapore. In Shenzhen, the Chinese trade zone where Lenovo makes most of its laptops, the manufacturing is overseen by another American, a former IBM-er named John Egan. He gets driven to work every morning from Hong Kong, passing through the giant border station that separates the former British colony from the Chinese mainland, while an endless stream of trucks bearing Chinese goods comes the other way, toward the ships in Hong Kong Harbor.
Together they have created an enterprise that is neither entirely Chinese nor entirely American. Lenovo writes its software and designs some of its ThinkPads in Raleigh, and does other laptop development in Yamato, Japan, another former IBM facility. Yao and his designers operate out of Beijing, coming up with smaller, lighter machines, many for the Chinese market, where Lenovo has about a 30 percent share of the market. There are additional factories in Poland and Mexico, and several are planned for other countries.
Lenovo's experiment—creating a global enterprise with Chinese and American roots—is exactly the kind of experiment that Washington ought to be encouraging. As more global Chinese enterprises emerge, the more globally minded China's behavior is going to become. Lenovo is the New China example we want Old China to follow: an enterprise so integrated into the rest of the world that it will begin to force China to take into account international laws and standards.
But Washington doesn't work that way. Democrats react reflex-ively—and negatively—to the idea of a Chinese firm buying out an American company. They assume—sometimes correctly, sometimes not—that the result would be a loss of jobs inside the United States. Republicans are equally unhappy. They view each purchase of an American entity by the Chinese as a potential security threat. Business leaders fear the theft of American technology. “The problems with the U.S.-China relationship in the next few years are largely going to be here, not in China,” Anne-Marie Slaughter, the dean of Princeton's Woodrow Wilson School of Public and International Affairs, told me after spending a year living in Shanghai. “They are more ready for the next stage in globalization than we are.”
We are going to have to get ready—fast. Like the Japanese in the 1980s, the Chinese today are the world's capital exporter. They are shopping for the best technology and the best talent here, just as American managers shop in China for the most efficient, reliable, and inexpensive factories. The only question is whether we can figure out how to adjust to this new reality.
The good news is that after twenty years, we figured out how to deal with the Japanese. When I reported from Japan in the late 1980s and the early 1990s, we spent most of our time writing about the political uproar that accompanied every major Japanese purchase of an American icon—Universal Pictures, the Empire State Building, the Pebble Beach Golf Club. Today, as I travel around America—to places as different as Alabama and Indiana—the concern is that the Japanese are not investing fast enough. Americans are only beginning to think about China as a potential investor.
When they do, there will be fears in Congress that the Chinese will begin deciding which factories stay open and which are shuttered, which American companies will thrive and which will be left as roadkill in the financial crisis. That is why we need more Chinese companies modeled after Lenovo—with managers and owners from many nations. “The Chinese government plays no role in what we do,” Bill Amelio told me from his office in Singapore. The company's boardroom and management, he pointed out, don't even look very Chinese anymore. “When you look around at our board and our top managers, there are a lot of different passports.”5
The look changes, of course, when you walk inside the doors of the Shenzhen factory, near Hong Kong. At its upper reaches, the company may be full of freewheeling designers who are jetting off to Yamato and Raleigh, but down in the manufacturing center of China, when it comes to producing as cheaply as possible, Lenovo looks like every other computer maker in the country.
The factory is tucked in amid plants run by the Chinese firms that churn out Apple's iPhones and iMacs, and a dizzying array of Japanese and European-branded computers. But what is most striking about the Lenovo factory is how un-automated it all is. Young women, no more than twenty or twenty-one years old, spend all day doing welding that could be done by a robot. But it is cheaper to have the young Chinese laborers perform the work. That enables the company to change models instantly without reprogramming all their equipment. The workers told me they made about $300 a month, a pittance by American standards, but ten or twenty times what they might make at home. It is boring, repetitive work, but they all told me they felt lucky to have the job.
The bustling Shenzhen plant explains a lot about why Lenovo thrives in the capitalist authoritarian state of China. The unspoken bargain today is that as long as companies keep generating jobs, no one in the government is going to tell them how to run their businesses. “As long as we keep employing people, and expanding, the Chinese will stay off our backs,” one American who works in Lenovo's senior management told me. “They don't want to be deciding where we build factories, or where we sell our stuff.”
He paused. “What we don't know,” he said, “is whether that freedom goes away if China stumbles.” We may be about to find out. By the end of 2008, with a recession looming in the United States, some of those factories were slowing down and laying off workers.
THE SECOND PART of the bargain in a capitalist authoritarian state, of course, is that Chinese knowledge workers—highly educated, highly compensated, free to travel the world—are expected to keep their heads down when it comes to challenging the government on sensitive issues like “splittism” or human rights. So far, it looks like many Chinese are willing to take that deal. I discovered that one morning in Beijing when I was having tea with Lenovo's freewheeling laptop designers.
The day I arrived at the Lenovo R&D center, China's efforts to quell the uprising in Tibet suffered another setback. A group of dissident monks in Lhasa, in a brilliant move, infiltrated a press tour of the capital for foreign reporters. The tour was one of those stage-managed visits that the government organizes, under tight controls, to convince Western correspondents that the tales of violence, burning cars, and mass arrests have been greatly exaggerated. But this effort backfired.
They chose the famous Jokhang Monastery, one of Tibet's holiest shrines, which, according to Tibetan legend, dates back to 647 CE—around the time that China was the political powerhouse of the world. Even then, Tibet was worried about its autonomy, and the temple was built under the reign of a Tibetan king, Songtsän Gampo, who sought good relations in the neighborhood by marrying both a Nepalese princess and a princess from the Tang Dynasty in China. Reflecting the strange mix of Tibet itself, the temple today is a four-story-high combination of Tibetan, Nepalese, and Chinese architecture, spread over six acres.
Long before the protests, a substantial Chinese military presence existed throughout the city. There were troops at the mountaintop monasteries, to make sure that the Buddhist ceremonies did not turn into anti-Chinese rallies. The monks sometimes take American visitors aside to show them hidden pictures of the Dalai Lama—tucked away in a busy mural, or secreted inside a locket.6 But the Chinese have a deeper problem than surreptitious veneration of the Dalai Lama. A new generation of Tibetans seems to chafe at the Dalai Lama's call for peaceful resistance. Much as they honor His Holiness, they fear his Gandhi-like approach over the past four decades has accomplished nothing—except creeping Chinese domination.
For the press tour, of course, the Chinese authorities were confident they could keep evidence of those tensions under wraps. They were wrong. As the reporters toured the monastery, a group of red-robed monks suddenly appeared and yelled, “Tibet is not free!”
Weeping, they accused the government of planting fake monks in their midst to give the reporters a glowing account of life in Tibet under Chinese rule. The Chinese guides froze. They knew if they shoved the monks away, or clubbed them, the violence would become the news story—hardly what they had in mind. So for a while the Chinese guides seethed, until finally demanding that the journalists just get out.7
The monks’ protests dominated the papers the next day—though the version in the International Herald Tribune didn't read much like the version in the government-run China Daily. At Lenovo, sipping tea with Yao's team, I gingerly raised the subject of the Tibetan protests— and the farce of the government press tour. The designers appeared stricken. Looking at each other, they shrugged—each waiting for the other to go first.
“We don't like it,” one of the twentysomething women on Lenovo's industrial design team said to me as we started walking through the laboratory. She looked around to make sure none of her colleagues saw us talking about the subject. “But it is in a different place,” she said, “and it is not our business. We design the newest laptops.”
She was part of the post-Tiananmen Square generation, probably about five or six years old when students took over the center of the city in a direct challenge to the Communist Party. I was in China a few weeks after Tiananmen, when young people her age were outraged at the repression and the government's effort to minimize the death toll. But that was nineteen years ago.
Members of the Lenovo generation had learned to avert their eyes. They have grown accustomed to a system that allowed plenty of economic liberalization but only the most limited political dissent. They understood the unspoken deal: In the New China of capitalist authoritarianism, you can do whatever you want—start up a new company, change jobs, travel abroad, vent your frustration in a blog post—as long as you don't veer out of the clear lane markers. You do not challenge or question the legitimacy of the Communist Party, especially to visiting reporters. When asked, you offer up the standard talking points about how greater economic freedom will lead, over time, to greater political freedom with “Chinese characteristics.” You explain that in a country of 1.3 billion people, unfettered democracy would lead to chaos. After work, you go out drinking, but you stay away from meetings to plan demonstrations. The Lenovo generation does not camp out in front of the Great Hall of the People; there is too much to lose the next morning back at the Great Hall of the Product.
But, try as they might to shield their eyes, it was impossible for members of Yao's team to ignore what was happening in Tibet. Whatever they thought about Hu Jintao's crackdown, they knew that perceptions of China's action abroad would be taken out on the torch relay—their torch—as it raced through twenty-one nations. Within days, their fears turned into reality. The “One World, One Dream” slogan that sounded so inclusive on the streets of Beijing seemed to lose something in translation. Suddenly, Lenovo's R&D staff got a quick education in how the rest of the world viewed China.
One of the worst receptions was in London on April 6, when the torch was run for seven hours through the city to the site of the 2012 Olympics in Stratford. Protesters went after the torch with fire extinguishers, unsuccessfully trying to wrestle the torchbearer for control of the flame.8
The next day in Paris, 3,000 police were needed to protect the torch, especially from demonstrators who had watched the fire-extinguisher trick in London and decided to try it en masse. Fearful that the torch would be extinguished on global television, the authorities reached for the hidden on-off switch in the Lenovo torch and doused the flame themselves. Then they put the torch on a bus to run it to its next destination in the city. The whole day was a cat-and-mouse game between torchbearers and torch protesters.
As Lenovo's staff watched in disbelief, many other young Chinese reacted in anger. Zhu Xiaomeng, a student at Beijing's Foreign Studies University, helped organize a boycott of Carrefour, the French retailer, in reaction to the Paris protests. Online petitions gathered 20 million electronic signatures. “China used to be known as the sick man of Asia,” she told my colleague Andrew Jacobs. She was determined to turn the tables on Western countries, using the power of China's consumers to demonstrate that the country would tolerate no disrespect. “After five thousand years, we're not so soft anymore,” she said.9
When I asked Amelio a few weeks later about the reactions inside his company—with its split loyalties between China and the West—he turned quite cautious, realizing that he was stepping on shaky ground. He clearly did not want to give the Chinese government reason to think they had provided the foreigners running Lenovo a bit too much license.
“We had to talk a lot of people in the Lenovo team through this one,” Amelio conceded. “Some of our Chinese team members understood, some didn't.” He quickly pointed out to me that he had personally carried the torch, briefly, when a shortened relay was run through the streets of San Francisco, the only stop in the United States. (The city canceled the closing ceremony to avoid further protests.) Amelio was a big supporter of the Beijing Games and, of course, Lenovo's sponsorship. But by lacing up for the run, he demonstrated to the Chinese that he was on Beijing's side of the Great Torch Standoff.
Unfortunately for Lenovo, it wasn't relay-runners like Amelio who were capturing the headlines. All of the front-page pictures showed the team of Chinese agents in blue-and-white Olympic track suits, who had trained for a year at China's Armed Police Academy to protect the flame. In their signature dark black sunglasses, and in their stoic demeanor, they looked like extras in a Jackie Chan movie, shoving people aside and making sure no protester got close enough to the flame to extinguish it or steal it. This group of super-fit guardians had a wonderful name: “Olympic Sacred Flame Protection Unit.” Its members were clearly hand-picked for the job: The average height of the thirty members of the squad was reported at six feet three inches. Quiet street diplomacy was not their forte. If Central Casting had ordered up some thugs to represent Old China, these would have been the guys.10
In June the Chinese executed the most daring torch run of all-through the streets of Lhasa, the same streets that three months before had erupted in violence. The ceremonies were held at the Potala Palace, the historic seat of the exiled Dalai Lama, with Chinese troops stationed every few feet along the route. The Communist Party secretary of Tibet, Zhang Qingli, left no doubt who was in charge. “Tibet's sky will never change and the red flag with five stars will forever flutter high above it,” he declared. “We will certainly be able to totally smash the splittist schemes of the Dalai Lama clique.”11
But by then the talk among Western leaders about whether to boycott the opening ceremonies to express their displeasure had dissipated. After the earthquake in Sichuan Province in May, there had been an understandable outpouring of sympathy for the Chinese people, and suddenly no one was thinking about boycotts. Bush, who had entertained the Dalai Lama in the residence of the White House several times—a way of avoiding an “official” meeting in the Oval Office—made clear he was going to Beijing, after issuing the ritual calls for the Chinese leadership to open up a dialogue with the exiled Tibetan spiritual leader. When I asked Condoleezza Rice one afternoon why Bush was so quick to reaffirm that he would attend, she gave me an answer I don't think I would have heard from her, or from Bush, in 2001.
“I didn't think that made much sense,” she said of boycotting the opening ceremony. “I told the president that it wouldn't only be an insult to the Chinese leaders, it would be an insult to 1.3 billion Chinese people.”
She was probably right. But Bush never made a serious effort to square that decision with his “freedom agenda,” which he insists will be the lasting legacy of his administration. Nor did he square it with his decisions to tighten restrictions on the odious regimes in Burma or Cuba. He had come to the same conclusion that his predecessors had: We simply need China too much, on too many critical elements of the American agenda, to risk a real confrontation on human rights. In short, we do not have the leverage to reward New China and punish Old China. They are inseperable; they are symbiotic.
“Both are the real China,” Jeffrey Garten, a longtime Asia expert who shaped the Clinton administration's strategy for dealing with rising economies before he became the dean of the Yale School of Management, told me during the torch run. “And Americans have to get used to that. We have to shed our habit of separating the world into good guys and bad guys and recognize that some countries are both. Unless we consider China an economic partner on one hand, and a political and military problem on the other, and unless we deal with each dimension on its merits rather than mortgaging one to the other, our policies will veer from one extreme to the other, and we'll fail to achieve any of our objectives. It's a new world for America's relationship with the country that will be most important to it, and I just hope we are up to the challenge.”
FOR THE BETTER PART of the past sixteen years, over two administrations, Washington seemed befuddled about how to deal with the two Chinas. Both Bill Clinton and George W. Bush argued, time and again, that New China would invariably strangle Old China—that a country so in love with the fruits of capitalist enterprise would soon hunger for an end to authoritarian rule. So far the theory remains unproven. For now, the argument that New China will soon subsume Old China remains what James Mann, once a China correspondent for the Los Angeles Times, terms “The China Fantasy.”12
Whether it is a fantasy or, as I suspect, just a prayer for the future, every modern American president has embraced it. They have no choice.
When Bill Clinton took office in 1992, he was still threatening to limit China's trading rights unless it got serious about human rights. It's one of those lines that gets huge cheers on the campaign trail, particularly when delivered in a state hard-hit by Chinese competition, like Michigan or Ohio. Then reality set in. Within the first year of his presidency, he abandoned that talk and ended up articulating George H. W. Bush's policy—the complete separation of trade from human rights issues—more forcefully than his predecessor in office had ever explained it. By the time he left office in 2001, Clinton had dragged his party, kicking and screaming, toward a new American strategy: He argued that the magic of the Web spread freedom and undermined the Communist Party in ways that no military action, no trade agreement, and no democracy-promotion program ever could. During trips to China and during debates at home over whether to let China join the international trading system, Clinton talked endlessly about how the Old China problem would solve itself as villagers logged on, and began to discover how their fellow citizens were dealing with such issues as polluted water, corrupt officials, and elections. Inevitably the Communist Party's monopoly on information would erode. When it did, its authority would erode too.
Clinton used the Internet logic to argue why the United States should let China join the World Trade Organization, despite the complaints that he was “rewarding” a repressive regime. He made a compelling case that by integrating China into the global economy, America would be forcing it to adopt the rule of law. (It was the same argument that Clinton made, more delicately, about Russia.) It was only a matter of time, he told an audience of American and Chinese students in March 2000, before a Net-savvy, rising middle class would begin to demand its rights, because “when individuals have the power not just to dream, but to realize their dreams, they will demand a greater say.”13 After all, Clinton said, it had happened in South Korea, which shook off years of military rule. Why not China?
It sounded so logical that Democrats and Republicans alike voted for China's admission to the World Trade Organization, despite their many misgivings. That turned out to be a good thing: WTO membership forced China to open many of its markets, and paved the way for American insurance companies, automakers, and others to compete.
A decade later, the Chinese are freer to express their opinions than ever before—within limits. They create chat rooms to vent their frustrations about corruption. The government tries to keep the dissenting chatter under control, but it is a little like fighting the tides: As my colleague Nick Kristof has pointed out, in the cat-and-mouse game between censors and bloggers, “the mice are winning this game, not the cats.” When censors take down one or two sites, the material gets posted on fifty more. Yet the truth is that none of this venting appears to have undermined the authority of the party, at least yet. Few authoritarian governments have figured out how to turn the Internet to their advantage better than the Chinese. It took a while, but they have learned the importance of letting their own populace use the blogs to blow off steam. They have learned, reluctantly, to let foreign news pour into the country via the Web—also within limits.
Determined Web trollers, of course, can get anything. One day in an Internet café in Shanghai during Bush's trip there in 2001, just after 9/11, I tried to get on the Times website, only to discover that many stories were blocked. A young boy, no more than fourteen or fifteen years old, sidled up next to me and asked, “Mister, what you need?” I explained, and with a few strokes of the keyboard he routed the request through a foreign server and called up the Web page I sought.
“Great!” I said. “I can't thank you enough!”
He held out his hand. “Five bucks,” he said with a smile.
I paid up happily, figuring I was supporting the subversion of an authoritarian regime. But if Chinese teenagers have learned how to turn the Web to their advantage, so have Chinese industrial spies. At the same time that they are controlling access at home, they are exploiting the openness of the Web abroad. At the Pentagon and inside American intelligence agencies, officials watch as Chinese computer operators sweep up what one senior American intelligence official described as “terabytes of data” every week from American corporations and government sites. Most of it is lying there in the open, and the Chinese presumably sift through it for anything that might give the country a competitive leg up. It is this astounding mix—the ability to mine the databases of the Pentagon while blocking access to YouTube videos of Chinese police beating monks senseless in Lhasa—that has given China its reputation for harnessing the political and economic muscle of the Web. It is Old China and New China, cohabiting on the same hard drive.
GEORGE BUSH'S backflips on China outdid Clinton's—which was no small feat. In 2000, during the presidential campaign, he famously kept talking about treating China as a “strategic competitor.” In two separate interviews I conducted before 9/11, two of Bush's aides actually used the phrase “the Red Chinese” to describe the government in Beijing. In six years of living in and covering Asia, I don't think I had heard that phrase once, except maybe in old newsreels about the Korean War. China was many things when Bush came to office, but “red” was not one of them.
The phrase, though, reflected a mind-set when Bush took power. The neoconservatives who had arrived in their new offices in the White House were determined to describe China in the most threatening terms. And the Chinese helped fuel their arguments by mounting a huge espionage operation in the United States, scooping up corporate data, weapons information, and, of course, whatever they could learn about American policy toward Taiwan. Many around Bush, including Secretary of Defense Donald Rumsfeld, pushed for a far more aggressive approach toward “containment” of Chinese power, using the flawed comparison between China today and the Soviet Union of 1981.
To his enduring credit, Bush rejected the containment crowd. “China was the exception to the rule in the White House because Bush saw it in transformational terms,” Chris Hill noted at the end of the administration. China was one of the few countries that Bush had visited as a young man, when his father was the U.S. representative there prior to the opening of formal diplomatic relations. “He was often telling people about riding around on a bicycle in Beijing, and he would marvel at the changes.” His travels through China at that formative moment of his life gave him a comfort and an affection for the Chinese people that ended up defusing several potential collisions with the Chinese throughout his presidency. Unfortunately, China was the exception. As a young man Bush never went bicycling in Tehran, Pyongyang, Havana, or Rangoon.