By 1978, after the “epic impoverishment” borne of Mao’s non-market, ideologically-driven economy, China was almost like “a hot air balloon [that had been held] ten feet underwater” and suddenly let go, described Daniel Rosen, founding partner of the Rhodium Group, before an audience at a recent colloquium organized by Shorenstein APARC’s China Program.

Rosen—who leads the Rhodium Group’s work in China, India, and Asia—drew on his 26 years of professional experience analyzing China’s economy, commercial sector, and external interactions, to share his insights on the implications of China’s recent divergence from liberal market norms even as the U.S. and China are trying to reach an agreement that could end a protracted trade war.

With its explosive rise, increasing U.S.-China economic tensions, argued Rosen, were inevitable. By reverting to non-market principles under Xi Jinping, however, China’s divergence from advanced economic norms has triggered a hostile reaction from the United States.  He acknowledged that China has “the sovereign right to choose the system it thinks best for itself,” including reverting to non-market principles.  But, he noted, “as an old adage goes, paraphrased, China’s freedom to swing its fists stops where other noses begin.”

China, with its thirteen trillion-dollar economy is now the world’s second largest economy.  China’s economic footprint, too—as trader, foreign investor, and lender, among others—is enormous around the world.  Thus, Rosen pointed out, now when “China sneezes, the rest of the world can catch a cold or pneumonia.”  By disavowing the primacy of market principles, furthermore, China’s decisions will now have spillover consequences for not only the way the rest of the global economy functions but also for economic prospects of the United States.

Rosen highlighted, in particular, three aspects of China’s divergence from market norms:  its financial markets, competitive regimes; and IP protection rules.  China’s capital markets give preferential treatment to its domestic state firms and discriminates against not only foreign firms but also its private firms.  He also stressed China’s uneven competition policies—as most dramatically epitomized in its “Made in 2025” policy—that establish asymmetric market access for foreign firms in China versus Chinese firms abroad; China’s state and sub-state financial subsidies set up to advantage domestic firms; and China’s domestic control of intellectual property in large swathes of critical industries.  China’s “Made in 2025” policy thereby, for example, distorts the innovation ecosystem of the world and the United States.  As Rosen asserted, “We depend for our vitality on structural conditions that non-market policy choices by a systemically important national could disrupt.”

In Rosen’s assessment, President Xi Jinping had begun his tenure with a far-reaching set of economic reforms called the “60 Decisions” of the Third Plenum Resolution in 2013.  But these market-centered initiatives, many of which Xi’s administration did push initially, led to “mini” (and “many”) crises, he stated.  These reforms, therefore, have stalled.  “The shadow over U.S.-China economic engagement comes not because China refused to reform in the Xi Jinping years,” Rosen asserted, “but because lately it has stumbled in attempting to do so.”

NEW YORK, NY - MAY 6: Traders and financial professionals work at the opening bell on the floor of the New York Stock Exchange (NYSE), May 6, 2019 in New York City. The Dow Jones Industrial Average dropped over 360 points at the open on Monday morning after U.S. President Donald Trump said that the U.S. will raise tariffs on goods imported from China. China also threatened to skip upcoming trade talks following tariff threats from President Trump.

According to Rosen, hardening U.S. approach to Chinese trade policy and the current discussion of possible “disengagement” with China are the result of U.S. recognition that China had changed course away from convergence with the liberal international economic order.  It, in fact, stems from the U.S.’s valid need to protect its economic welfare and the welfare of other market economies from the deleterious effects of China’s illiberal policies.  In the same way, he claimed, that the U.S. is not as deeply engaged with Italy as it is with Germany, and that we are not as deeply engaged with Germany as we are with Great Britain, it is not “heresy” to say that nations that do not share the same basic economic framework cannot be as engaged together—or as interoperable—as nations that do.  

But, Rosen predicted, China’s own turn away from market principles is bound to fail.  Liberal market reforms delivered double-digit growth for China since Deng Xiaoping’s Opening and Reform.  And “[u]nless everything we think we know about the relative efficiency and dynamism of free markets over politically controlled economies is wrong, the present Chinese policy turn will be, in the end, a dead-end,” Rosen remarked.  According to his prediction, therefore, we will either see a weakened China that poses less of an economic and national security threat to the U.S. or a China that eventually returns to market norms (i.e., “a reversion back to what will work.”).

In the meantime, therefore, he suggested that the American response must be “provisional,” “partial,” and “peaceful.”  American policy must be adaptable and readily reversible such that our ability to reengage to the maximum with China is carefully protected.  Secondly, it must be “partial” rather than absolute.  And, lastly, it must be “peaceful.”  When Beijing’s non-market policies fail, as it will, Rosen averred, and China re-orients itself towards economic convergence with advanced economy norms once more, we must ensure a “foundation of good will” between the U.S. and China to which China can return.

Rosen also cautioned against the U.S. abandoning its own source of national strength—i.e., its openness.  Arguing that economic protectionism has too often been confused with national security, Rosen argued that primary threats to U.S. national security now stem more from new causes like climate change, pandemics, migration pressures and access to weapons of mass destruction.  “Economic protection will do little to nothing to address those risks,” Rosen pointed out.

Rosen spoke at Shorenstein APARC as part of the China Program’s Colloquia Series “A New Cold War?: Sharp Power, Strategic Competition, and the Future of U.S.-China Relations.”  The series continues on May 3 with Ambassador Chas W. Freeman, Jr.’s seminar “On Hostile Coexistence with China.”

Did you know MIP has a joint degree program with Stanford Law? Find out why our graduate student, Julia Neusner, decided to add on the MIP program to her studies on our FSI blog. #MIPFeatureFriday

On Thursday, the third Asia-Pacific Geo-Economic Strategy Forum (APGEO) saw discussion on issues of international strategic cooperation in the Asia-Pacific with a particular focus on the U.S.-Japan relationship. Speakers included experts on defense and foreign affairs, including former U.S. National Security Advisor H.R. McMaster and former Japanese Ministers of Defense.

Organized by the Hoover Institution, Nikkei Inc. and the Freeman Spogli Institute of International Studies (FSI), the talks occurred within the context of the United State’s Free and Open Indo-Pacific Strategy (FOIP) and Japan’s Medium Term Defense Program, both recently updated to outline the U.S. and Japan’s respective regional commitments.

The forum’s speakers focused on the rise of China as a common theme underscoring the importance of the U.S.-Japan alliance. Particularly, the speakers shared a general consensus that China’s attempts to increase its economic and political influence and its initiatives to drive progress on technological frontiers such as 5G networks and artificial intelligence pose a threat to the current international order...

Read the full article in The Stanford Daily

"Being at Stanford is a unique experience... Over time I just became interested in how cyberspace is very realistically connected to our everyday life, and on a larger scale, national security." Read more on our FSI blog on how our MIP student, Maho Sugihara, is focusing on cyber policy and its security implications. #MIPFeatureFriday

The Stanford University Scholars Program for Japanese High School Students or “Stanford e-Japan” is an online course sponsored by the Yanai Tadashi Foundation and the Stanford Program on International and Cross-Cultural Education (SPICE), Stanford University. This online course teaches Japanese high school students about U.S. society and underscores the importance of U.S.–Japan relations. Through Stanford e-Japan, ambassadors, top scholars, and experts throughout the United States provide web-based lectures and engage Japanese high school students in live discussion sessions called “virtual classes.” Stanford e-Japan is now in its 5th year and 8th session overall.

On March 15, 2019, 29 high school students across Japan were notified of their acceptance to the Spring 2019 Stanford e-Japan Program. The online course kicks off today and runs until August 23, and will include students representing Aichi, Chiba, Fukuoka, Gunma, Hiroshima, Hokkaido, Hyogo, Kanagawa, Nagano, Niigata, Okinawa, Osaka, Saitama, Shizuoka, Tokyo, and Toyama. In addition to a diverse geographical representation within Japan, the students themselves bring a diverse set of experiences to the program, many having lived overseas in places such as Canada, China, the Philippines, and the United States.

The selected Stanford e-Japan high school students will listen to lectures by renowned experts in the field including Professors Emeritus Daniel Okimoto and Peter Duus, and Professors Katherine Gin Lum, Phillip Lipscy, and Kenji Kushida (Stanford University) on topics such as “Baseball Diplomacy,” “The Atomic Bombings of Japan,” “The Attack on Pearl Harbor,” “Religion in the U.S.,” “U.S.–Japan Relations,” and “Silicon Valley and Entrepreneurship.” Live virtual classes include guest speakers such as Ms. Suzanne Basalla (Toyota Research Institute), Ms. Maiko Cagno (U.S. Consulate, Fukuoka), and Mr. Andrew Ogawa (Quest Venture Partners).

Many Stanford e-Japan students in the current cohort (as well as past ones) have mentioned their desire to study in the United States. The Stanford e-Japan Program equips many students with the motivation and confidence to do so, in addition to many of the skills they will need to study at U.S. universities and colleges. In addition to weekly lectures, assignments, discussion board posts, and virtual classes, the program participants will complete a final research paper on a topic concerning U.S. society or the U.S.–Japan relationship.

“Through this course, we’ve raised Japanese students’ interest in U.S. society and U.S.–Japan relations, which is fantastic,” commented Brown. “I’ve encouraged them to seriously consider undergraduate studies in the United States and to look into opportunities like the Yanai Tadashi Foundation Scholarships.”

Stanford e-Japan is one of several online courses for high school students offered by SPICE, including the Reischauer Scholars Program, the China Scholars Program, and the Sejong Korean Scholars Program. For more information about Stanford e-Japan, please visit stanfordejapan.org.

To be notified when the next Stanford e-Japan application period opens, join our email list or follow us on Facebook and Twitter.

Related articles:

• Yanai Tadashi Foundation and SPICE/Stanford University
• Winners announced for the Fall 2018 Stanford e-Japan Award
• Spring 2019 Stanford e-Japan online course now accepting applications

Applications opened yesterday for the China Scholars Program, an intensive, college-level online course on contemporary China for U.S. high school students. The China Scholars Program is offered by the Stanford Program on International and Cross-Cultural Education (SPICE), Stanford University, and is open to rising 10th, 11th, and 12th graders. The Fall 2019 online course will run from late August through December. Applications are due June 15, 2019.

Stanford University China Scholars Program for high school students
Fall 2019 session (late August through December)
Application period: April 15 to June 15, 2019
 

Accepted applicants will engage in a rigorous academic exploration of key issues in China, spanning politics, economics, social issues, culture, and the arts, with an emphasis on the relationship between the United States and China. In real-time conversations with leading scholars, experts, and diplomats from Stanford University and other institutions, participants will be exposed to the cutting edge of U.S.–China relations and scholarship. Students who complete the online course will be equipped with a rare degree of expertise about China and international relations that may have a significant impact on their choice of study and future career.

As in previous sessions of the China Scholars Program, the Fall 2019 cohort will comprise high school students from across the United States. Participants in the current cohort represent states across the nation, including New York, New Jersey, Massachusetts, Missouri, Indiana, Pennsylvania, Illinois, Arizona, California, and Hawaii. The immense diversity of student backgrounds and experiences within each online course allows for an especially rich exchange of ideas and perspectives among the young scholars—a crucial and invaluable component of the learning experience.

“It’s been one of the most fascinating, valuable, and formative classes I have ever taken,” says Rebecca Qiu, a recent alum of the program. “Every week, you discuss pressing topics—from technology censorship to the urban-rural divide—with your motivated peers. During virtual classes, you have the opportunity to ask questions and speak with some of the most influential experts and researchers on modern China—I cannot emphasize how valuable this is. [The China Scholars Program] provides you with a huge breadth and depth of knowledge on China and U.S.–China relations that you cannot find in any typical high school class.”

More information on the China Scholars Program is available at http://chinascholars.org. Interested high school students can apply now at https://spicestanford.smapply.io/prog/china_scholars_program/. The deadline to apply is June 15, 2019.

To be notified when the next China Scholars Program application period opens, join our email list or follow us on Facebook and Twitter.

The China Scholars Program is one of several online courses for high school students offered by SPICE, Stanford University, including the Reischauer Scholars Program (on Japan), the Sejong Scholars Program (on Korea), and the Stanford e-Japan Program (on U.S. society, offered to high school students in Japan).

Related article:

• The China Scholars Program: Continuing a 45-year tradition of bridging Stanford and schools