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U.S. Anti-Communists’ China Fears

Shouldn’t Americans be grateful for China’s smooth transition to the market economy — instead of trying to undermine it?

December 11, 2003

Shouldn't Americans be grateful for China's smooth transition to the market economy — instead of trying to undermine it?

Despite the end of the Cold War, China is still Communist (at least in name), making it one of barely a handful of countries still subscribing to that ideology.

According to some in Washington, it still presents a clear and present danger to the United States.

The only thing that has changed, in this view, is the kind of danger it poses.

Slightly more than half a century ago on the Korean peninsula, China became the first — and only — major Communist power to confront American soldiers directly on the battlefield.

Rather than its military capabilities, the tip of the “bayonet” directed at the United States is now the low exchange rate of the Chinese currency, the yuan. Critics charge that it helps crafty Chinese exporters drive entire U.S. industries out of business, decimating the American labor market.

Critics charge that it helps crafty Chinese exporters drive entire U.S. industries out of business, decimating the American labor market.

It is quite a turnaround, to be sure, since even in the 1990s, few U.S. companies were afraid of competition from China.

Rather, they viewed it as an amazingly backward, overwhelmingly agrarian society that might have some future potential as a market for U.S. goods.

But now, even though the dispute is predominantly economic, ideology is never too far below the surface.

Complaints about China’s command economy — and the rigid communist leadership that keeps the free market at bay — have started to surface.

Even U.S. trade unions and manufacturers are joining forces in a united anti-Beijing front. But in reality, China is managing a successful implosion of communism.

And it is using the wealthy United States — and its near-insatiable demand for imports as well as a somewhat undervalued domestic currency — to achieve rapid economic growth.

Indeed, some U.S. industries have suffered as a result of competition from China — although U.S. consumers benefit tremendously, by getting lower prices at the checkout counters.

But those Americans who believe it is so patriotic to criticize China should think of the alternatives.

For a truly frightening example of what could have happened otherwise, just look at North Korea. That’s what China could have developed into — had it not chosen to implement economic reforms.

North Korea, which has a population of just 22 million and is one of the world’s least developed nations, nonetheless manages to threaten the United States with its long-range missiles and suspected nuclear weapons.

And in the border regions of China, those North Koreans who manage to slip out of their own country to escape its permanent famine, are creating a major social problem.

Now imagine another North Korea, but this one with dozens of nuclear weapons, advanced missile technology — and a population that is almost 60 times larger than North Korea’s.

During the Cold War, Washington kept Russia at bay by keeping its nuclear missiles trained on its territory.

Now, a policy of containment is shaping up toward China. But the weapon of choice is now the yuan — which, Washington policy makers claim, must be revalued and allowed to float freely.

Tinkering with the yuan may be dangerous for China. The transition away from Communism has been difficult and painful, and considerable imbalances exist in the Chinese economy.

Currency stability, in fact, has been the linchpin of China’s economic success. During the 1997-1998 Asian financial crisis, the yuan’s peg to the U.S. dollar kept China from the worst of the crisis.

The government’s determination to maintain it also insulated it from much of the damage.

In reality, rather than complaining and trying to undermine China’s progress, U.S. policy makers should be happy that the economic adjustment China has engineered at home has been going so smoothly.

If the opposite were the case, and China had gone the way of North Korea — or even suffered the kind of turmoil Indonesia and Thailand experienced in the late 1990s — Washington would have had to spend hundreds of billions of extra dollars to contain China militarily.

All the while, it still would have lived in a constant fear of a catastrophic nuclear confrontation.

So if you had asked an ardent U.S. anti-communist in the 1960s, 1970s or 1980s what his worst fear about China might be by 2003, and had suggested it would be a slightly undervalued currency, you would have been considered out of your mind.