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Empathy and diversity between China and the West require new approaches to the state-market relationship

Published onJun 27, 2022
Empathy and diversity between China and the West require new approaches to the state-market relationship

Peaceful competition is more urgent than any time since the 1940s or the early 1960s. Recent developments – such as the war in Ukraine and the strict lockdowns all over China – seem to aggravate the challenges for consensus building between East and West but they also dramatically increase the need for understanding. Perhaps these developments are even catalyzers – unwanted and tragic as they might be – of a global order that has been emerging since 9/11 or the global financial crisis. Day by day some degree of economic decoupling seems bound to prevail under the shadow of increased geopolitical fractures, although its definite contours remain to be seen, especially with reference to the dominance of Chinese supply chains. What are the main challenges for peaceful competition and how to address them under the low carbon transition?

Bridging the breach of understanding – let alone building consensus – between China and the West, especially taking China’s stance and growing power into account, depends above all on acceptance of and respect for diversity. But that is not the world we have been raised in, where universal values and rights have often carried a strong association with liberal democratic values, although these have been put aside frequently when core interests were deemed at stake. In China, diversity is not something questioned per se, because at the bottom China has always felt different and perhaps unapproachable to foreigners in a deep sense. Internally, diversity is accepted and fostered up to a certain point where it does not conflict with community or national interests. The United Nations (UN) is still the most important body to deal with common yet different rules for diversity. Agreeing on the sustainable developing goals (SDGs) and the 2030 Development Agenda and the Paris Agreement commitments took a deep effort of mutual understanding and faith in universal values. But perhaps we need to go one step further by setting the scene for discussion and agreement on a broader compact to reengage the global community with a sense of urgency. Business as usual will not do.

For over three decades, the debates over the enlargement of the UN Security Council have shown the difficulties of power redistribution in a world that is very different from the world that emerged after World War II. The failure of the Doha Round and the travails of the WTO in many of its initiatives, for example, compound a sentiment of weakening of multilateralism that is difficult to square with the need for a strong rebound of global understanding and consensus. The spread of COVID and the lack of effectiveness of WHO and multilateral cooperation in dealing with its consequences are not to be forgotten, even though individual cooperative efforts have coexisted with this multilateral failure. Internationalists across the spectrum have called for plurilateral action in the domain of the G20 or smaller groups that would be more amenable to consensus building. Today – two and a half months after the start of the ongoing war in Ukraine – the hurdles in international dialogue seem even more difficult to overcome through multilateral action. But, unlike during the Cold War, China and the West are intertwined by trade, technology and – not least – by global commitments set to deal with sustainable development and climate change. Those challenges – among others – still permeate the world and must be part of the answer to the current international conundrum. Climate change, energy transition, the digital economy, artificial intelligence, and data/information security are bound to shape the future through technological innovation and profound changes in the modes of production and consumption, including by spurring new forces for migration and by reshaping the market for commodities, both food and minerals.

Even though the war in Ukraine has provoked a fierce and unexpected reaction from the West, and its effects continue to grow and ripple outwards in the form of new sanctions with the potential to affect some markets fundamentally in the short or medium term, a complete fracture is not desirable nor likely. China has grown closer to Russia in the last decade and its leaders declared a friendship with no limits for cooperation a few weeks before the war in a Joint Statement on the International Relations Entering a New Era and the Global Sustainable Development1. But China’s economic links to the West and to global multinationals have been one of the mainstays of its accelerated historic development, and they greatly surpass links with the Russian economy. Also, according to local reports, Chinese companies have been very cautious in trying to avoid being affected by any sanctions from the West. Recent surveys by American and European Chambers in China2 show that multinationals have no major plans for relocation and that they have fared well in the last two years, although the sense of uncertainty has grown in the aftermath of the lockdown in Shanghai. Interestingly, the first part of the Sino-Russian joint statement is entirely devoted to question the so-called “one-size-fits-all’ template to guide democracy and the promotion of different categories of human rights. A true global dialogue must not avoid such themes, which form probably the thorniest part of any global understanding, given that any such understanding inevitably relies on values and basic principles, upon which it is very difficult for societies with very diverse cultural and historical backgrounds to reach agreement.

For China, national development and national rejuvenation are at the center of its declared strategy. Thus, any international initiative that curtails China’s development prospects or aims at containing its development will not only be firmly opposed but will also probably be used to reinforce nationalistic purposes that may undermine cooperation, especially in view of China’s history of humiliation by the West since the first Opium War. Hence, China’s way of empowering its position on the global stage has been to rely on pragmatic cooperation, based on a few or vague shared goals, such as in the case of the Belt and Road Initiative and the recent Global Development Initiative, launched by Xi Jinping at the last UN General Assembly and supported by over 100 countries. Additionally, China has built a strong diplomatic network and has rightfully expanded its activities and leadership role in international organizations. It has also constructively contributed with new organizations devoted to sustainable development finance, such as the Asia Infrastructure Investment Bank and the New Development Bank.

But how can the West allow China to grow stronger without putting Western values or its modus vivendi at risk? This very question is based on pre-assumptions that contradict the diversity called for in the beginning of this text. A powerful and developed China, with its long and unique culture and history, will require accommodation from the West even in relation to the different contours of its political regime. This accommodation will need to include Western adjustments not only in economic and political spaces, but also in military spaces in Asia and, gradually, in other parts of the world. This requirement for accommodation by the West is exactly what has been witnessed in the last decade or so. At the same time, China will need to accommodate Western concerns not only about democratic and human right values, but also about unfair competition in its domestic market. The desire for a compromise seems to have been put into abeyance because of the deterioration of US-China relations following the trade war started by President Trump in 2018 and the geopolitical cleavages deepened by the pandemic since 2020. Actually, the last five years have unfortunately seen a consolidation, both in the Chinese and Western establishments, of the idea that the advancement of each side is a zero-sum game, despite strong contrary voices and evidence. It has also helped to advance an agenda of exclusion, which may foster a word of dualities or multiplicities even in the face of inefficiencies, such as in the case of alternative payment systems.

One of the consequences for the world of China’s accelerated development has been the need to revisit the relationship between market and state, or the whole mainstream notion of economic development regarded until recently as a recipe by most of Western-driven institutions. Notwithstanding the fact that Chinese development is very recent and that it is still on a path to being a truly innovation-driven economy, it has at least necessitated a fresh look at the right mix of state and markets on the way to development. Advocating a fresh look at this relationship does not imply defending a Chinese model, but rather bringing to light different models of development and the need to look at different country perspectives and institutions. It remains to be seen whether the kind of state-funded or state led-innovation path chosen by China will be able to produce the science paradigm shifts and technological breakthroughs required for sustained world leadership by 2049, but there is no doubt that the Chinese approach has already caused the need for changed strategic policies in Western countries, including the United States. It has also – understandably – been regarded by many developing countries as a possible alternative or source of inspiration.

It is a contradiction that national states have been recognised as the main actors and drivers of international relations for over four centuries – even with new actors emerging in the last decades in civil society, multinationals, non-state, etc. – and that such state-driven activity is still considered anathema in some circles when it comes to leading economic and social development. This contradiction has become even more apparent in a world where any serious effort to address key challenges depends on agreements reached between states and on regulations adopted and enforced by states, even if most of the funding and action are to come from the private sector, as in the case of climate change. According to the report “Global Landscape of Climate Finance3, Asia has mobilized the largest amount of climate finance in the years 2019-2020, with public sources accounting for over 61% in East Asia and the Pacific. While, in the West, private sources prevail and there are calls for the private sector in Asia to increase its contributions to green finance, it is worthy of note that China has been a game changer in industries such as solar and wind power, and electric vehicles. The increased ambition in commitments required in the next years to meet the Paris Agreement and the need to accelerate investments to fulfill the sustainable development goals (SDGs) by 2030 will certainly require a different mix of state and private sector interactions in different countries and regions.

At the time of writing, too many uncertainties plague the outlook for many of the key challenges for peaceful competition in the short term because of the war in Ukraine, the lingering on of the pandemic and lockdowns in China, as well as the broad rebuilding of security alliances and energy security reconsiderations in Europe vis-à-vis Russia. These have not altered the fundamental competition between the West and China, but they have compounded the challenging backdrop for multilateral cooperation and added relevant nuances. As much as economic conditions are often paramount in explaining cooperation or even formal alliances, the agenda of values seems to have a growing space in our times. Moreover, the so-called global south is very diverse and different countries have their own rationale and interests in avoiding to take sides. Finally, the fact that for the first time in history the “contesting” power is a developing country and leader in many emerging technologies and industries adds new proposals for the rules of the game.

Establishing some empathy between the West and China on the way to build a more sustainable future is a necessary step for peaceful competition and below are some ideas for further debate and study:

  • Forging a higher degree of cooperation between China and the West hinges on broader acceptance of diversity by both sides.

  • The current scenario of war in Ukraine and lockdowns in China have compounded the challenges for sustainable development but they have not fundamentally altered the competition at play. They could act as catalyzers of a new order. They also seem to highlight the complexities of taking sides based solely on an economic or value agenda.

  • Accommodation is required on both sides.

  • This is so because the key long-term structural challenges of our times – climate change, energy transition, data and information security, the digital economy and AI, health, among others – will still require global answers.

  • China and the West are intertwined by trade, technology and – not least – by global commitments set to deal with sustainable development and climate change. Those challenges must be part of the answer to the current international conundrum.

  • A new compact at the United Nations is necessary for reengaging multilateral actors. Such a compact should not be exclusive, but should co-exist and be complemented by building consensus through other plurilateral groups.

  • The role of the state in spurring new modes of production and consumption should be recognized as a necessary topic for discussion, opening the way to new understandings on the desirable mix between market and state in different circumstances and economies. China’s economic development is a source of inspiration that has been highly regarded by countries with different political and economic regimes.

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