There is cause for concern: ever since America’s “pivot” – later redefined as a “rebalancing” – to Asia, China-U.S. competition for power and influence in the Asia Pacific has meant rising tensions in the East and South China Seas between an assertive China and American allies Japan and the Philippines.
Washington’s drive to clinch far-reaching free trade and investment deals with the European Union and key Asia Pacific nations is viewed with suspicion and hostility in Beijing. Amid mutual accusations of hacking and cyber-espionage, escalating tensions characterise China-U.S. relations in cyberspace.
Much has been said and written about these and other facets of the high-stakes rivalry between rising China and an uncertain America seeking to readjust to a downgrading of its traditional superpower status.
Stephen Roach goes beyond the visible signs of malaise in the world’s most important relationship to tackle the less-discussed “unique pathology” of China-U.S. economic ties. “Both nations are trapped in a web of co-dependency”, writes the Yale senior fellow and former Morgan Stanley chairman who had a ring-side seat during China's economic miracle and the Asian financial crisis.
The premise he presents is simple: China is over-reliant on American consumers buying the goods it produces, while the U.S. is over-reliant on cheap Chinese goods and Chinese investment to fund its debt. Roach believes that a rebalancing is the only lasting solution – and requires a role reversal. China will have to consume more while the U.S. needs to change from consumer to producer.
Roach dwells on the political, social and historical contexts that make such a transformation difficult, not least because Chinese households have a deeply ingrained saving habit while “personal consumption is the essence of the American Dream.” But the rewards are well worth the effort, presenting enormous opportunities for both sides.
China’s rising middle class, with its hunger for foreign goods, offers great potential for a revived American export machine. “Similarly, a rebalanced China has much to draw on from the world’s quintessential consumer – goods, services, systems and managerial expertise,” says Roach.
In a world flooded with books on the China “threat”, Roach’s analysis is refreshingly factual, informative and insightful. This banker and economist has written a book which is strong on fact but is also a very good read.