America’s former ambassador to China on Monday said the rising nation was not going to “play by the rules” as long as there’s uncertainty in their major exports markets.
Jon Huntsman, who was a candidate for the Republican Party’s presidential nomination until January of this year when he left the race and endorsed Mitt Romney, was Barack Obama’s ambassador in Beijing for two years.
On Charlie Rose, he pointed out the disparity between how Americans view China and how the Chinese see their own country.
We look at China and we see 1.3 billion people, the second largest economy in the world, largest consumer of electricity, the largest emitter, so on. You know, $3 trillion in the central bank. They look at China and they see seven hundred million people still living in poverty.
Chinese leaders also see a “vast income disequilibrium between the haves and the have nots,” said Huntsman. While the United States urge China to become a “responsible stakeholder” in the world system and abide by international trade agreements, policy makers in Beijing worry what effect a reduction in protectionist measures would have on their people’s incomes and economic growth—especially as the mounting prosperity in China is the main if not sole legitimizing force of the Communist Party’s rule.
China’s currency manipulation is a particular source of frustration in bilateral relations. The Americans complain that Beijing keeps its money underpriced and with it, Chinese exports. Although the value of the renminbi has appreciated by more than 50 percent compared to the dollar since 2005, President Barack Obama insists that the Chinese currency is “undervalued” and should be “increasingly driven by the market.”
Because China is so dependent on exports, it cannot afford to let its currency appreciate at a steeper pace without hurting manufacturers.
Premier Wen Jiabao warned last year that a sudden increase in the yuan‘s value would bring “disaster” to China. “Factories will shut down and society will be in turmoil,” he said. Relatively small price changes, whether driven by monetary policy or increased labor costs in China, could convince companies to move production elsewhere while hundreds of millions of Chinese still want factory jobs. So “of course” the government has reason to fear social unrest, said Huntsman.
The country also faces an enormous demographic challenge that may cut its economic trajectory short once four hundred million Chinese have retired by the middle of this century—more than America’s total projected population by the time. This helps explain China’s trepidation about securing resources abroad and building national champion industries that can employ millions whether there is growth or crisis in the West.
“Do they want to abide by the rules of the road? Not yet,” according to Huntsman. “Not until there’s greater certainty and clarity in terms of what the global economy looks like. Because it all comes down to one word—stability.”