John J. Metzler

NEW YORK — Dr. Henry Kissinger called for the United States and China to collaborate on a new global order, and a groundbreaking new report, “U.S.- China Economic Relations in the Next Ten Years,” underscored the deepening commercial engagement between the two Pacific powers.

Indeed with President Barack Obama meeting his Chinese counterpart Xi Jinping in California in June, an overview of Sino-American relations is timely.

In a high profile presentation at the prestigious Asia Society, the China-United States Exchange Foundation rolled out its new report which calls for deeper engagement and mutual benefit for the world’s two largest trading economies. Importantly the survey brings needed historical context to a trading relationship, which while massive today, was virtually non existent thirty-five years ago.

Recalling the initial contacts between the United States and China during the Cold War, Henry Kissinger, the architect of Washington’s historic opening to Beijing in 1972 stated, “When we started the relationship we had a common adversary; today we have a common challenge.” Dr. Kissinger was of course alluding to President Richard Nixon’s opening of the Sino/American relationship in 1972, to counter the Soviets during both the Cold War and final stages of the Vietnam conflict. Today, the context of Sino/American ties is viewed primarily through the commercial prism.

Key to Mainland China’s economic revival were of course Deng Xiaoping’s reforms initiated in late 1978 which would blossom into a mixed market economy, replacing the static and stagnating socialist model from 1949 to 1978, to a now more open economy.

The report states, “Between 1978 and 2012, Chinese real gross domestic product (GDP) grew from $341 billion to $8.2 trillion to become the second largest economy in the world, after the U.S.” The survey adds, “Since 1978, central planning has largely given way to market forces.”

Hundreds of millions of Chinese have been pulled out of abject poverty and a proper network of social services is emerging. Indeed the People’s Republic of China’s once- dismal per capita incomes have surged from $354 in 1978 to $6,102 in 2012. By comparison the document adds that U.S. per capita incomes in the same period surged from $29,390 to $49,880 in 2012.

Interestingly back in 1978, Mainland China international trade stood at $20 billion. Today, China’s total trade in goods and services stands at a staggering 4.3 trillion!

China’s post-1978 Reform Process initiated by paramount leader Deng Xiaoping has been truly impressive on the socio-economic side. These amazing changes have yet to inspire a democratic process to challenge the Chinese Communist Party’s political monopoly.

There’s an impressive narrative. U.S. exports to China have grown five-fold between 2000 and 2010. If trends continue, China is likely to surpass Canada as America’s largest export market. The report cites General Motors being the market leader in the burgeoning Chinese car market. Wal-Mart is China’s largest retailer. In 2011 there was $54 billion in American direct investment in China. And according to the U.S. Department of Commerce there’s $4.3 billion in PRC investment in the USA.

The U.S. China Economic Relations Survey states the Chinese exports to the USA in 2010 stood at $293 billion; “By 2022 the U.S. and China are likely to be each other’s largest trading partner…Chinese exports to the U.S. are estimated to reach $805 billion.”

While American exports to China have expanded impressively, Chinese exports to the USA have surged exponentially. U.S. Department of Commerce statistics show that in 2010 American exports to China stood at $114 billion while Chinese exports to the USA actually surged to $365 billion. Washington ran a $273 billion trade deficit with Beijing in a recession year! Last year’s U.S. deficit with the PRC widened to $315 billion.

The rise of China’s middle class, and wider domestic consumption, offers opportunities for American firms. While the U.S. remains the largest supplier of agricultural products to Mainland China, American firms have many possibilities in helping China achieve food safety and security levels. Given China’s poor food safety (largely fueled by corruption) and staggering pollution levels, both states should stress energy cooperation and pollution control technology. This offers a win-win for both sides.

Viewing the extraordinary commercial ties between the two Pacific partners is impressive; but what of the PRC’s rigid political context which will ultimately make or break the rosy business relationship? We must re-focus our political lens lest we miss the wider reality.

John J. Metzler is a U.N. correspondent covering diplomatic and defense issues. He writes weekly for WorldTribune.com.

  Deng Xiaoping, From Nixon’s historic opening to the new U.S.-China world order: Now what?, Henry Kissinger, Xi Jinping