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By James McGregor
12 September 2006

It took an undiplomatic Chinese diplomat to tell China and America what we both need to hear: "It is high time to shut up!"

In a mid-August BBC interview Sha Zukang, China's ambassador to the U.N. in Geneva, used those words to tell American politicians to stifle complaints about Beijing's rapidly growing military budget. He noted that defense spending in China, with a population five times larger than the U.S., is a small fraction of the American military budget, which accounts for nearly 50% of global arms spending. "It is the U.S.'s sovereign right to do whatever they deem good for them," Mr. Sha said. "But don't tell us what is good for China." As Mr. Sha's comments indicate, after 25 years of economic reforms and more than a decade of nearly 10% annual growth, Beijing is weary of and angry about America's constant criticism. The Communist Party leadership is turning this hectoring to its advantage at home, where the leaders understand that, while in the age of the Internet they can't stop information from coming in, they can shape how the people think about what they learn from abroad.

Since the early '90s, the Chinese leadership has been teaching its people that China is re-emerging as a benevolent great power while America is determined to hold China back. School textbooks portray the U.S. as a hegemonic power seeking world domination, and rank us equal to terrorism as a threat to world peace and stability. The state media echoes that message, depicting American advocacy of democracy, press freedom and individual rights in China as a cynical plot to destabilize the country.

Their efforts are effective. A March 2006 opinion survey by the Global Times, a Chinese newspaper, showed that 59% of city-dwellers believe the U.S. seeks to contain China. The 2005 Pew Global Attitudes Project survey showed that only 42% of Chinese view the U.S. favorably. A 2003 survey by Duke University of hundreds of Chinese cities and rural counties indicated that the more educated people are, the more likely they are to hold negative views of the U.S.
My personal experiences after 15 years in Beijing reflect those results, even among Chinese who studied in the U.S. At a lunch I hosted to bring Henry Kissinger together with young Chinese entrepreneurs, he looked around the table and asked: "Now that we have such impressive economic progress in China when and how do you envision democracy developing?" They looked at him, aghast. Finally, one answered for the group: "Do we want to destroy all the progress China has made?"

When the Chinese look at America, they see a media-driven political system with election campaigns featuring crass manipulation of wedge issues that divide the population, while failing to focus on America's real problems. When they look at their own system they see a political strategy that attempts to hold the people together as tightly as possible for as long as possible -- albeit by brutalizing those who get in the way -- to make the necessary wrenching changes China must go through to prosper.

The Chinese people want the rule of law and fairness. But they also want a government that solves problems and focuses on progress. The many vainglorious and venal local Communist Party cadres are roundly detested. But Chinese who experienced the chaos of the Cultural Revolution also believe that America must be purposely seeking to destabilize China. Surely the U.S. isn't so naive as to think instant democracy would make China a better place?

Half a world away, our sensationalist broadcast media is equally adept at demonizing China for the American populace. When CNN's Lou Dobbs discovered that ranting generates ratings, he quit asking CEOs thoughtful questions about China and now focuses on flogging it for stealing jobs and unfairly threatening U.S. economic preeminence. Bill O'Reilly and his infotainment-obsessed brethren at Fox stir up a similar stew of angry anti-Chinese cornpone. And neither network has any trouble finding like-minded and uninformed talking heads from the Congress eager to obscure their own leadership and policy failings by laying America's economic insecurities and difficulties at China's doorstep. During a book tour that took me to many American broadcast outlets in the past year the producers invariably asked: "Are you our anti-China or our pro-China guest?" They were baffled when I answered that I was the "let's-try-to-understand-China guest." Our TV screens may be in color, but discussions of China are exclusively in black and white.

The rest of the world doesn't share our fear and loathing of China. For the past 15 years, its diplomats have undertaken a very effective charm offensive to build a positive image abroad. People-to-people contacts abound, with Chinese students filling universities around the globe. Outbound Chinese tourists now outnumber those from Japan. China's slogan for dealing with its neighbors is: mulin, anlin, fulin, which translates as: be friendly, make them feel secure and help make them rich. It works. A 2004 BBC poll of 23,000 people in 22 countries showed that 48% considered China a positive global influence -- 10 points higher than the U.S. Moreover, the survey showed that 58% of the respondents ages 18-to-29 had a positive view of China.

So what should an insecure and out-of-sorts superpower and a paranoid and increasingly pugnacious aspiring superpower do to avoid a collision? First, do as Ambassador Sha requests: "Shut up!" Second, both sides need to designate statesmen with the stature, credibility, influence and wisdom to shape public opinion and bring a halt to the systematic demonizing of one another. From America's side, I nominate Hank Paulson, the Treasury secretary. He is well-regarded in China and well-informed as a result of making some 70 trips there during his Goldman Sachs days. His business background is a huge plus. After two decades of on-the-ground experience investing billions of dollars and employing millions of people in China, the U.S. business community is far ahead of politicians in understanding the Chinese government and people.

Mr. Paulson also has a ripe opportunity. Both President Bush and Condoleezza Rice are too bogged down in the Middle East, and ideologically uncomfortable with China, to do more than occasionally trim the weeds of the U.S.-China relationship. While Mr. Paulson comes to his new office too late to become Mr. Bush's Bob Rubin, he does have three years to set himself up to be the next Kissinger for China. The business community, both governments and the media will listen to him if he is forceful and forthright.

It will be easier for Mr. Paulson to influence China than many think. Behind the bluster, the Chinese leadership under President Hu Jintao is uncertain and searching for where to take the country as it becomes an integrated part of the global community for the first time. China doesn't really know what it wants to be next. It just knows that it doesn't want to be what it used to be: a feudal country that foreigners could carve up like a ripe melon, eventually becoming a dysfunctional civilization that a messianic leader could bring to the edge of social and economic insanity. With WTO membership, China's doors are now permanently open. Foreigners are part of the Chinese business and social fabric and a restive Chinese population is increasingly demanding an accountable and honest government. Chinese leaders understand that there is a mismatch between their economic and political systems that needs to be aligned, but they aren't sure how to do it.

The current danger is that Chinese leaders will believe their own baloney, that America's main goal is to keep China poor and weak, and base their future course on that premise. The truth is, some in America have that agenda. But another truth is, we couldn't do it even if we wanted to.
We can't afford to let the ignorant and insular in both China and America teach, tease and taunt our two nations into an unnecessary and potentially cataclysmic collision. Mr. Paulson is 60 years old, wealthy as hell, and intrigued by China. What else does he have to do for the next couple of decades?
Mr. McGregor is CEO of JL McGregor & Company, a China-focused research, advisory and investment firm. He is the author of "One Billion Customers: Lessons From the Front Lines of Doing Business in China" (Simon & Schuster, 2005).

(Copyright (c) 2006, Dow Jones & Company, Inc.)

This article was posted on: September 26, 2006

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