Before Chinese President Xi Jinping gave the green light for “Made in China 2025,” he should have consulted Sun Tzu’s classic manual The Art of War: “Move not unless you see an advantage; use not your troops unless there is something to be gained; fight not unless the position is critical.”
What was the Chinese leadership thinking when it implicitly challenged US technological leadership while an unpredictable US president made trade relations with China a key issue in US foreign trade? Was it patriotic sentiment, bad timing or an early sign of hegemonic hubris?
China’s lopsided trade advantage with the US ($500 billion in exports and $150 billion in imports) means that the US sends about $1 billion a day to China to buy Made in China products. For the Chinese, it is by far its most profitable trading relationship, and easily the most profitable in the history of global commerce.
Rather than keeping the gravy train going and quietly working on new technology, China saw fit to announce it would further reduce its reliance on foreign (mostly US) technology. Taken to its logical conclusion, China would become the world’s dominant tech producer and exporter. It would reduce the rest of the world to modern equivalents of colonies – suppliers of food and raw materials and buyers of Chinese tech.
The world can’t say it hadn’t been warned. In the 1980s, Japan laid waste to the Western consumer electronics industry and threatened to do the same with the Western car industry. “Voluntary Japanese export controls” were needed to save the Western car industry. In 1979, Harvard professor Ezra Vogel wrote his best-seller Japan as Number One: Lessons for America, arguing that Japan had become the pre-eminent industrial power and had none of the internal problems plaguing the United States.
For almost a decade, Japan’s industrial juggernaut was seen as unstoppable. At the height of the hype, the value of Tokyo’s real estate exceeded the real-estate value of the entire US. The Japanese government added fuel to the fire by announcing the Fifth Generation Computer Systems project. FGCS would leapfrog Western computer technology in one fell swoop.
The hubris was at its height when the personal computer and the Internet were born, completely blindsiding the Japanese electronics giants. Microsoft would soon control the massive PC market and Apple became what Sony should have become. The FGCS froze to death during the so-called AI winter and was never heard from again.
The Plaza Accord of 1985 forced a dramatic revaluation of the Japanese yen. Its value vis-à-vis the US dollar nearly doubled and contributed to the so-called “lost decade” that can still be felt in Japan to this day. Nearly 40 years later, the US is still plagued by internal problems, while China has taken the place of Japan. The Middle Kingdom is a different and much bigger kettle of fish, but it shows signs of behavior that is reminiscent of Japan in the 1980s.
Like Japan, the Chinese government underestimated US power. Using its control over the global financial system and its dominant position in computer technology, the US can virtually cripple foreign companies by denying them access to its market. US law is ultimately global law. For now, few companies can survive without US technology and outside the US-dominated global financial system.
Unlike Japan, China also started to challenge the US militarily. It drastically increased military spending. Irritating potential friends and foes alike, it is building and militarizing artificial islands in the South China Sea in disputed territorial waters, some as far away as Borneo, more than 2,000 kilometers off the coast of China. Some disputed “islands” are barely above sea level and courts are still debating whether they should be classified as rocks or islands.
The Chinese government justifies its territorial claims in the South China Sea using language that echoes the US when it identifies threats to its democracy, its legitimate rights, and its national security.
Sun Tzu would have shaken his head in disbelief. “Those who wish to fight must first count the cost.” He would have made a level-headed cost-benefit analysis, taking into account the collateral damage of antagonizing neighbors for little gain.
Most of all, he would have understood that challenging the US militarily is a fool’s errand as long as the US has the financial and technological clout to bring mighty Chinese tech firms like ZTE and Huawei virtually to their knees without firing a shot.
The Middle Kingdom
In ancient times, China was the “Kingdom in the Middle,” the very center of civilization of the known world. The conceptual basis for this belief was the so-called Luo Shu diagram, a checkerboard grid consisting of nine squares. According to ancient legend, Heaven was round (yin), and Earth was square (yin). The Luo Shu was the “order” humans created on Earth. China occupied the center of the nine-grid square, hence the Middle Kingdom.
The Luo Shu is based on a mythological tale, but it served as the blueprint for the foundation of Chinese civilization. All of China’s ancient capitals were based on the nine-square Luo Shu grid. To build its cities, Chinese builders developed construction principles we now associate with the Industrial Revolution: standardization, modularization and prefabrication and highly complex supply chain systems of a scale never seen before or since in human history. More than 2,000 years before machines were invented in Europe, the Chinese built cities covering 100 square kilometers for a million inhabitants that were ready for occupancy in one year.
The high mark of these massive building projects was the Tang era city of Chang’an (“Perpetual Peace”), which served as the capital for 10 dynasties. The Tang Dynasty (AD 618-907) is seen by many as China’s Golden Age. Chang’an was one of the three largest cities in the world, together with Constantinople (Istanbul) and Baghdad. The city had several state academies, colleges for law, mathematics, calligraphy, music, and was a cosmopolitan urban center with a large foreign population.
Chang’an was the gateway to the Silk Road and attracted traders and scholars from as far away as Rome. It had Taoist abbeys, Buddhist and Zoroastrian temples, Persian Nestorian-Christian churches, synagogues and mosques. The city had dozens of ponds, pavilions, orchards, medicinal gardens, polo fields and entertainment centers. By most accounts, Chang’an was the high mark in Chinese civilization.
New Silk Road
In a strategically smart move, the Chinese government launched a modern version of the Silk Road (the Belt and Road Initiative), the largest infrastructure project in the world by far. It connects East Asia with Western Europe and will potentially speed up economic development of the entire Eurasian continent – if China can rein in its hegemonic impulses.
With a bit less saber-rattling, China may even get India on board the BRI. Instead of seeking global domination with its “2025” program, it should look at its Golden Age and pick a different slogan: “Making China Tang Again.” The enlightened Tang rulers were not without faults, but the Chinese rulers can always consult Confucius for sound advice: “Learn from the ancients, but avoid their mistakes.”