All FSI News News April 28, 2022

U.S.-China Relations in the Age of Uncertainty, a Conversation with Yasheng Huang

MIT professor Yasheng Huang joined SCCEI for a conversation on the fundamentals of U.S.-China relations and shared his thoughts on how the U.S. can disrupt current bilateral tension and advocated for more data-based, factual, and analytical discussions on China.

On April 22, 2022, Professor Yasheng Huang, Epoch Foundation Professor of International Management and Professor of Global Economics and Management in the Sloan School of Management at Massachusetts Institute of Technology, joined Scott Rozelle, co-director of Stanford Center on China's Economy and Institutions and Helen F. Farnsworth Senior Fellow at the Freeman Spogli Institute for International Studies and the Stanford Institute for Economic Policy Research, for a lecture and discussion on current U.S.-China relations.

Watch the Recording:

Huang shared his thoughts across three major areas: the current fundamentals of U.S.-China relations, how we got where we are now, and what we might do to change the dynamics between the two countries.  

Opportunities for Collaboration and Complementarity Between the U.S. and China
Huang began by describing the fundamentals of U.S.-China relations and opportunities for collaboration and complementarity between the two countries. Huang noted, for instance, that “if we look at innovations vis-à-vis applications markets and product scaling, [although] China is catching up in terms of innovations [and] inventions, it is still the case that the U.S. is the powerhouse.” Even though the U.S. has the capability to scale technology, U.S. policies and regulations make it challenging to do so. For that reason, Huang asserts that “China is the ideal place to scale technology,” highlighting technology innovation and scaling as an opportunity for joint collaboration.

Huang also outlines other opportunities for collaboration within academia, both through government funding opportunities and through labor. He explains the complementarity between what he calls “Republic of Government,” where the government spends money proactively on furthering academic research and “Republic of Science,” an idea introduced by Michael Polanyi stating that academic research is driven by collaborations and academic freedom. While China’s academic ecosystem operates primarily under the “Republic of Government,” the United States’ operates primarily under the “Republic of Science.” Huang notes, “you can have all the collaborations you want [and] all the academic freedom you want, but science is extremely expensive – you need the government.” In contrast to the U.S., China’s government has directed ample R&D funding toward science over the last decade. Huang explained that this could be another area for joint collaboration: China could fund scientific research in areas of bilateral interest that U.S. academics may otherwise not have had the resources to pursue.  In addition to high costs, he notes that science is also labor intensive. Chinese visiting students and scholars are critical to achieving the scientific research agendas within U.S. academic institutions. 

So, What Went Wrong? 
After outlining numerous opportunities for the U.S. and China to collaborate and complement one another, he turned to explore how and why relations have declined over the last decade. In short, Huang argues that “bad and deteriorating political fundamentals” over the last 5 to 10 years and the failure to address these political fundamentals led to extreme tensions between the two countries.

[The U.S.] systematically ignored the small changes that cumulatively could lead to meaningful flexibilities in the Chinese system down the road.
Yasheng Huang

Looking only at U.S. policy toward China, Huang shares examples of such failures:

  • A disconnect between academics and politicians. While academics might talk about trade in economic terms, politicians talk about trade in political terms. This “language barrier” leads to politicians making decisions on economic engagements on political grounds rather than empirical, academic grounds.
  • The U.S.’s absence of an explicit political strategy toward China. The U.S. “believed that economics automatically would change China.”
  • The U.S.’s unrealistic and grandiose aspirations for China. The U.S. wanted democracy, human rights, and rule of law to be instilled in China, but didn’t develop a strategy to link the areas it was firmly able to influence, like trade and investment, to effectively achieve these idealistic aspirations. 
  • The U.S.’s failure to acknowledge gradual change. According to Huang, the U.S. “systematically ignored the small changes that cumulatively could lead to meaningful flexibilities in the Chinese system down the road.”


The Long-Neglected Principle of Symmetry
Huang continued by sharing examples of failures in U.S. policy toward China and offered suggestions on how the U.S. could pivot to foster more symmetrical bilateral relations. Regarding academia, for example, he notes that China’s students and scholars are welcome on U.S. campuses and that Confucius Institutes are free to operate in the U.S. In return, the U.S. should demand unfettered access by U.S. academics to China. Business operations also offer an opportunity for a more symmetrical relationship. Alibaba has two cloud computing centers in the U.S. and can operate free of equity and data restrictions. Huang believes that to achieve more symmetrical relations, the U.S. ought to demand the same treatment Alibaba has in the U.S. for Google or Amazon’s cloud computer operations in China. Rather than the U.S. demanding more than what they are giving China, Huang insists on the same treatment – a symmetrical relationship. 

How Can We Fix our Existing Relationship?
Huang suggests the U.S. adopts a bottom-up approach and advocates for 4 areas of change:

  1. Seek symmetry. Demand the U.S. receives the same treatment the U.S. gives to China from China.
  2. Pivot away from a China-specific approach. Enforce and make policies without singling out China.
  3. Start hard conversations with China but with humility and mutually acceptable grounds. The U.S. should not try to simply impose its values on China (e.g., human rights and democracy), but rather should find acceptable and agreed upon terms by both sides.
  4. Invest in a U.S. knowledge base of China. The U.S. needs to invest in empirical research that increases our knowledge on China. 
Our policy community needs to move beyond basing their decisions on typecasting and pre-conceived judgements, and instead turn to data-based, factual, and analytical discussions on China.

A Need for Data-Based, Factual, and Analytical Discussion on China
Huang concludes his discussion by suggesting that our policy community needs to move beyond basing their decisions on typecasting and pre-conceived judgements, and instead turn to data-based, factual, and analytical discussions on China. This is exactly what we, the Stanford Center on China’s Economy and Institutions, advocate for through our mission and empirical research aiming to advance public understanding on China’s economy and its impact on the world. 
 

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