How to Integrate China Into the Global Order

When the 44th President of the United States arrives in the Oval Office this January, he'll find his inbox stuffed with urgent problems, including mounting disarray in Afghanistan and Pakistan, nuclear advances in Iran and North Korea, a resurgent Russia and a worldwide economic crisis. How he deals with such immediate troubles will help determine the success of his presidency. (Story continued below...)

Yet there's an adage common in business and management literature he'd be wise to keep in mind: "Don't let the urgent crowd out the important."

Despite the urgency of the problems listed above, the single most important challenge for the new administration—one with the potential to determine the character of the 21st century—is China and U.S.-China relations.

This may sound like an exaggeration. It's not. As goes China, so go 1.3 billion men, women and children—one out of every five people on the planet. China's economy is now roughly half the size of the United States'; in three decades, the two should be about equal. What Chinese people eat, how much (or whether) they drive, where and how they choose to live, work and play: all will have an enormous impact on the availability and price of energy, the temperature of the planet and the prosperity of mankind.

China's foreign policy will have a similarly profound effect. A cooperative China could help, among other things, stem the spread of nuclear materials and weapons, maintain an open global trading and financial system, secure energy supplies, frustrate terrorists, prevent pandemics and slow climate change. A hostile or simply noncooperative China, on the other hand, would make it that much more difficult for the United States and its allies to tame the most dangerous facets of globalization.

History suggests that the emergence of a cooperative China is anything but inevitable—and, in fact, is downright unlikely. Existing powers and rising ones are natural competitors or worse. Friction tends to result from the desire of the rising power to assert its influence and the desire of the existing power to resist it. Just think of Germany's actions in the early 20th century—and the reactions of Britain and France.

The best way to bring about a cooperative relationship—which would serve both China's and the United States' interests—is for Washington to make a concerted effort to persuade Beijing (and other powers like India and Russia, for that matter) to sign up for and support a set of rules, policies and institutions needed to meet the challenges of globalization. Call it "integration."

Integration should be for this era of U.S. foreign policy what containment was for the previous one. In substance, however, the two approaches could not be more different. Whereas containment sought to keep the Soviet Union out, integration seeks to bring China in. The goal should be to make China a pillar of a globalized world, so invested in the current system that it sees it as in its interests to keep things running smoothly.

Such an objective is ambitious, even optimistic, but not unrealistic. The United States and China need each another. China needs access to the U.S. market for its exports in order to maintain the high level of employment on which its growth— and domestic political stability—depend. Americans, in addition to benefiting from the relatively low cost of cell phones, DVD players and other Chinese imports, require Beijing to invest dollars in the United States and to manage China's large dollar reserves responsibly. This is in Beijing's interests, too—for China doesn't want to see the value of these dollar holdings plummet, as could happen if its central bank suddenly sold its dollars for euros or other currencies or commodities.

Both sides also need political stability. Neither wants to go to war over Taiwan, to see another conflict on the Korean Peninsula or to see world oil prices double as a result of a military strike on Iran's nuclear program. But history tells us that good things don't come about just because they make sense. On the contrary, much of history is about people and governments pursuing paths that clash with their clear self-interest.

To avoid repeating such mistakes, Americans need to accept China's rise. For one thing, it's not clear they could stop it if they tried. And attempting to block China would only ensure its alienation. Moreover, there is no need to exaggerate China's strength or the threat it poses. China's military, for all its improvements, is still a generation behind the United States'. The new administration must also resist pressures to block the access of Chinese goods and dollars to the U.S. market. Trade and investment aren't just beneficial on their own terms; they also contribute to the web of ties that would bind China into an orderly world order.

Meanwhile, U.S. foreign policy should focus on what China does, not what China is. Efforts to force China to become like the West will fail. Remember too that China is evolving on its own: it is already far more open than it was 10 or 20 years ago, and it is likely to become more open as time passes. Integration will create incentives and pressures for the extension of the rule of law, transparency and accountability. Political and economic freedoms are more likely to grow from China's evolution than from American hectoring.

That said, there's plenty Beijing needs to do, too. It should continue to exercise restraint on Taiwan. It should allow its currency to keep rising to a more natural level, in order to prevent its trading partners from turning to protectionism. And it should reign in Chinese nationalism. As communism fades and materialism fails to satisfy demands for a good life, nationalism could fill the void. Once unleashed, such a force is hard to control. To avoid this risk, China needs to keep growing economically and gradually open politically.

To steer this most important relationship in the right direction, Washington and Beijing should hold regular, high-level consultations. Consultations are to foreign policy what location is to real estate: not everything, but almost. The Bush administration made a good start with the cabinet-level Strategic Economic Dialogue (which also covers energy and environmental matters) and its military counterpart. Both should be extended and expanded by the new president.

Such talks won't be enough, however. It makes no sense for the finance ministers of seven of the leading industrial countries to continue meeting without China; it similarly makes no sense for the leaders of the G8 industrialized countries to convene absent their Chinese counterpart. China should be made a member of both groups and should be encouraged to cooperate more fully with the International Energy Agency to prepare for interruptions of fuel supplies.

Even if all this happens, China and the United States aren't likely to become allies. But they could build a relationship based on selective cooperation, complemented by an understanding to limit fallout from inevitable disagreements. Both countries have a stake in such an arrangement. Trying to bring it about—integrating China in-to the highest councils of the 21st century —should be a top priority for the new president and his team.