Anxiety about China’s rise will only hinder America’s response

US and Chinese flags during the G20 Summit in Osaka, Japan.

Americans have grown increasingly anxious about a rising China challenging the United States on the world stage, but the U.S. remains the stronger power in many ways. In this episode, Ryan Hass joins David Dollar to discuss the current state of U.S.-China relations and argue for a new China policy that’s rooted in the relative advantages that America possesses.

Hass is the author of a new book, “Stronger: Adapting America’s China Strategy in an Age of Competitive Interdependence.”

DAVID DOLLAR: Hi, I’m David Dollar, host of the Brookings trade podcast, “Dollar and Sense.” Today, my guest is Ryan Hass, a senior fellow in the China Center at Brookings. Ryan has a new book called “Stronger: Adapting America’s China Strategy in an Age of Competitive Interdependence.” He also has a companion piece in Foreign Affairs. So welcome to the show, Ryan.

RYAN HASS: Thank you for having me, David.

DOLLAR: So let’s start with the basic argument. I should say, I love the title of your Foreign Affairs version. That title is “China is not 10 feet tall.” So what’s the basic argument?

HASS: Well, the 10-foot-tall reference is a reference to a comment that former Secretary of Defense Schlesinger made cautioning against viewing the Soviets as 10-feet-tall during the Cold War—thinking of them as towering figures of immense strength and far-sighted wisdom. Part of what I hope to do through this book is to help limit the spread of 10-foot-tall syndrome now to the China challenge. My basic argument is that China is the biggest test confronting the United States. We need to take the challenge seriously, but in the process of doing so, we should avoid exaggerating Chinese strengths and overlooking their vulnerabilities because doing that leads to a distorted picture which creates bad policy choices.

So part of what I’m trying to argue is that seeing the China challenge clearly is the first step to getting China strategy right. But the book also makes an argument that the United States is not necessarily going to be able to determine China’s path. We will be able to control our own, and so it would be wise of us to focus on nurturing our own sources of strength—our domestic dynamism, our global prestige, and our alliance network. And I would like to see us take a calm and confident approach to dealing with the Chinese rather than a constantly anxious and reactive posture. I think we can afford to do so because in spite of our many imperfections we are the stronger party in the U.S.-China relationship and by a pretty good margin. So basically, what I am trying to argue, David, is if we live up to our values and our potential, we should be able to continue meeting any challenge and outpacing any challenger, including China.

DOLLAR: Yes, so I really like that basic assessment, Ryan. Take a good, clear look at China: They have strengths and weaknesses, and in the long run, I think the U.S. does have a lot more advantages. Let’s focus on economics for a moment. What are some of these weaknesses that you see, for example, in China’s economic system or economic policies?

HASS: I see three big handicaps that the Chinese have to overcome. The first is demographics, the second is debt, and the third is productivity. On the demographic side, the Chinese population is traveling a downward slope that’s going to get steeper as time goes by. They are going to go from having around eight working age people per retiree now to about two working age people per retiree in 2050. At the same time, debt is piling up in China. Just over the past decade, we have seen China’s debt-to-GDP ratio basically double. This is significant in part because it could limit China’s ability to push through the middle-income trap by buying its way up the value chain as Taiwan and South Korea did at similar stages of development. And then on the productivity side, Chinese workers are significantly less productive than their competitors or counterparts in other countries, and China is having a tough time squeezing out further productivity gains.

Then I guess the last thought that I would put out is on China’s need to build a social safety net. Until and unless they do so, it’s going to be very difficult to persuade the Chinese population to stop saving for a rainy day and instead increase consumption. And until that happens, it’s going to be difficult to fully rebalance their economy. But, David, you are a world-leading expert on this issue. I’d love to hear your perspective as well.

Read the full transcript.