Understanding China’s new imperial dynasty

“East is East and West is West and never the twain shall meet.” When Rudyard Kipling wrote these words in 1889 he was presumably referring to India. In retrospect, it is China he should have had in mind. Granted, it took more than a century for these words to reflect more than a literary setting, but the evidence today is indisputable.

What passes for the current trade war between the US and China is not a commercial dispute. For both contenders it is an existential issue, not to say a clash of civilizations, the outcome of which is liable to have a major impact on the world equilibrium for the foreseeable future.

Viewed from a macro-historical perspective, the United States is the product of a group of educated Englishmen moving to America and bringing with them their language, values and ethics. After having savaged the indigenous population, they broke with their mother country on issues of taxation and self-government and set off on their own course.

Over the subsequent decades, they had the benefit of space, massive natural resources and, last but not least, a system of government with few laws, that did not over-regulate everyday life and provided the individual with the space needed to develop his creativity and initiatives. As such America proved a magnet for all of those whom Europe persecuted, discriminated against or threatened, or who simply could not fulfill their potential. What emerged was a nation that won World War II, stood up to the Soviet Union and, when the latter imploded, was the unquestionable No 1 power both economically and militarily.

China, possibly, was America’s opposite. The longest continuous civilization in history, it emerged in the mid-19th century as an inward-looking, non-industrial society with a system of government based on subservience to the emperor and a mandarin bureaucracy that ensured that practically all aspects of daily life be regulated either by law or by custom.

The eruption of the West, namely Britain with the US not far behind, on the Chinese scene proved a disaster for China. Invaded and forced to sign discriminatory treaties, the country sank into anarchy. In 1911 the emperor was overthrown and by the end of World War II what was termed “the sick man of Asia” was in the throes of a major civil war opposing two competing warlords. While the United States supported one of them, it was the other who won, and on October 1, 1949, a new emperor emerged as the head of a new dynasty.

Charismatic, endowed with huge talent, the new emperor was also a law unto himself, and twice during his reign his social engineering almost brought down the dynasty. But when he passed away in 1976  ao Zedong had reasserted the power and functions of the Chinese state.

For the odd-20 years that followed the creation of the new dynasty, the United States did all it could to bring it down. Not only did it intervene militarily in Korea, Taiwan and Vietnam, but it prevented the new dynasty from taking is rightful seat in the world’s major forum, the United Nations, while subjecting it to a comprehensive trade embargo. This aversion to the new dynasty took on a near-religious fervor, captured in the words of a Jesuit priest who proclaimed, “The Chinese Communists are not Chinese. The Chinese Communists are not humans. The Chinese Communists are living devils.”

While the first emperor had the making of an ideologue, his successor, Deng Xiaoping, did not, and his vision of the world could be summed up in one sentence: “I do not care if a cat is black or white as long as it catches mice.”

Deng opened China to the world, and the development that followed for the subsequent 40 years was unequaled, but it was also predicated on a misunderstanding. For the United States, the opening of the Chinese economy to the outside would result in China slowly becoming a component of the international economic order, which, in turn, would result in the observance by China of a number of international norms. This, in turn, would impact the Chinese political system, which would be brought closer to that of the West. In other words, it was regime change through development.

Deng opened China to the world, and the development that followed for the subsequent 40 years was unequaled, but it was also predicated on a misunderstanding

But this was not part of the plans of the new dynasty and in particular of its latest emperor, Xi Jinping. Imperial power had not been restored with the purpose of forfeiting 3,000 years of tradition. Indeed, the opposite was true. It was by relying on a system of government that put the state at center stage that China would again emerge as a major power. And whatever rules might prevail in the international economic arena, these were rules made by barbarians for barbarians and were of no concern to China. What was of concern to the new dynasty was to preserve its imperial power structure with its mandarin setting, strengthening the state and providing for the welfare of the population through social stability and the adoption of national norms of behavior.

As part of this scenario, the issue of intellectual property was of no concern to China were it only for one single reason: It had none worth stealing. The same applied to market access. Some 40 years ago China’s domestic market was inconsequential and not one to attract foreign investors, which was predicated on there being a market.

What developed over the subsequent decades was an asymmetrical relationship. Increasingly Chinese wholly or partly state-owned companies engaged in trade relations with Western economic entities, which were purely private-sector owned. The advantage that the Chinese entities derived from this situation could probably have endured as a minor nuisance to the West had it not been for a question of metrics.

Suddenly the Chinese dynasty became too large to ignore, and its reach too global to overlook. Size in itself, however, was not the only issue. Ultimately, the issue became an existentialist one, raising the question of whether the two systems, the Chinese imperial system and the Western economic model, could function in parallel without inevitably heading for a collision course.

China’s imperial system is predicated on the state having the leading role in the society. It is the state that is responsible for creating an environment in which the individual can prosper, fulfill his ambitions and enjoy a minimum of well-being. On the economic level, the state operates in essence through a public sector that in turn operates in parallel to a reduced private sector, it being understood that the private sector will always be subservient to the state.

This, invariably, puts a Western economic entity at a structural disadvantage when dealing with a Chinese economic entity. Indeed, the Chinese entity will either be state owned or state supported and will therefore benefit from a level of support that is denied to a Western entity.

This quandary goes far beyond tariffs or quotas. Just as China’s new imperial dynasty will never relinquish its hold on its economy because it is through that very hold that it exercises its imperial power, the West, and in particular the United States, in the long term cannot accept an asymmetrical relationship that puts it at a structural disadvantage when dealing with the new Chinese dynasty.

Ultimately, both countries will have to come to some sort of compromise. For China, it will entail some reining in of its public sector when dealing with foreign economic entities.

And as for Washington, it will have to come to terms with the fact that in dealing with China, it is not addressing just another communist country or even a remnant of the Cold War but a new Chinese imperial dynasty.

And while this might not necessarily entail that East and West will ever “meet,” it should ensure a more structured relationship in which each partner will understand the language of the other.