Are China and the US heading for a break-up?
Stephen Roach says trapped in a relationship of codependency, America and China cannot seem to go beyond the fear of change and finger-pointing
Increasingly reliant on each other for sustainable economic growth, the US and China have fallen into a classic codependency trap, bristling at changes in the rules of engagement. The symptoms were on clear display during President Xi Jinping's visit to the US. Little was accomplished, and the path ahead remains treacherous.
Codependency between China and the US was born in the late 1970s, when the US was in the grip of wrenching stagflation, and the Chinese economy was in a shambles following the Cultural Revolution. Both countries needed new recipes for revival, and turned to each other in a marriage of convenience. China provided cheap goods that enabled income-constrained US consumers to make ends meet, and the US provided the demand that underpinned China's export-led growth strategy.
Over the years, this arrangement morphed into a deeper relationship. But economic codependency is as unstable as human codependency. China is now changing, and America doesn't like it. Not only is China rebalancing its economic model from exports to consumption; it is also redefining its national character. It has adapted a more muscular foreign policy in the South China Sea, embraced the nationalistic longing of rejuvenation, framed by what Xi calls the "China Dream". And it has started to reshape the global financial architecture. The US response has put China on edge, particularly the so-called "Asian pivot", with its subtext of containing China.
America's monetary policy reveals another layer of codependency. By citing international concerns - especially China's slowing growth - as a major reason for deferring its interest-rate hike last month, the Federal Reserve has left little doubt concerning the key role that China plays in sustaining a still-fragile US recovery.
Speaking in Seattle, Xi stressed the need for both the US and China to deepen their "mutual understanding of strategic intentions" as a key objective for the bilateral relationship. And yet his deliberations with US President Barack Obama were lacking in precisely that respect; the agenda was shaped more by disconnected issues - cybersecurity, climate change and market access.
Moreover, there was little sign of meaningful progress even on the issues discussed.
Trapped in a web of codependency, the US-China relationship has become fraught with friction and finger-pointing. In human behaviour, the endgame of this pathology is usually a painful break-up. The summit between Obama and Xi did little to dispel this possibility.
Stephen S. Roach is a faculty member at Yale and former chairman of Morgan Stanley Asia. Copyright: Project Syndicate