China is worried about the U.S. shutdown. And it should be.

October 9, 2013

Chinese President Xi Jinping, left, with Malaysian Prime Minister Najib Razak at a summit Obama was supposed to have attended. (Mohd Rasfan/AFP/Getty Images)

The shutdown of the U.S. government, and now the imposing possibility of a U.S. default, have generated a lot of discussion about what this means for the balance of power between the United States and China. It certainly doesn't seem to bode well for American interests that we're hobbling our own economy and putting some of our foreign policy on hold as China becomes more assertive about projecting its own influence. And that's a real issue for the United States. But, on balance, the U.S. crisis is probably causing China more problems than benefits. That explains why Chinese leaders have been outspoken about urging the U.S. to fix this – and it's a reminder that the U.S.-China relationship is still as much or more about mutual interests than competing ones.

It comes down to economics vs. geopolitics. First, here's the bad news for the U.S.: This helps China in geopolitical terms. President Obama had to cancel his plan to attend a geopolitically important summit in Southeast Asia this week because of the shutdown. Chinese leader Xi Jingping is now the star of the summit, which is more than just symbolic. As Columbia University Prof. and China expert Andrew Nathan put it, "It’s not about the cancellation of a particular trip." Rather, "It will be hard to sell anyone in Asia on any spin other than that this is a sign of deep structural weakness in the American system."

This is a moment  when Southeast Asian nations have to decide if they want to bandwagon with the United States or inch under China's growing influence. None of these countries doubt that the U.S. is richer and more powerful than China, and will be for a long time (officials in Beijing are typically the first to acknowledge this). What they worry about is that America will lose interest in the region; the less committed Washington seems, the riskier the U.S. will look to Asian countries, and the more likely they'll be to just accept China as the new regional power, since Beijing is at least in it for the long haul. So Obama skipping the summit sends exactly the wrong message: that the U.S. is too distracted by internal issues to follow through on our commitment to Southeast Asia. We're not quite gift-wrapping the region for China, but that day is not many canceled summits away from happening.

The other side of this is economics. And it's not so much good news for the U.S. as it is bad for China, in ways that likely outweigh any geopolitical benefit from the shutdown. The Chinese and American economies are really, really closely linked. We're not quite yet one another's closest trading partners – China trades a bit more with the European Union than with the U.S., and the U.S. trades a bit more with Canada than with China – but we're projected to be in the next decade. That means that any tremor in one of those two economies can have a major impact on the other, and both countries are better off if the other is economically healthy. That's why a lot of the talk during the 2012 presidential campaigns about punishing China for currency manipulation turned out to be just talk: the U.S. knew it would also be punishing itself if it did anything to hurt the Chinese economy. And for that same reason, Beijing knows it's economically better off if the U.S. economy is successful. Any slowdown is bad for China's economy; a default would be very bad.

Here's the really important part: China cares about its geopolitical standing, and would certainly like to increase its influence in Asia, but it cares about its economy a lot more. This a country that almost saw everything collapse during an economic crisis just 24 years ago that ended with troops gunning down protesters in Beijing. Since then, the country's implicit social contract has been that the Communist Party delivers breakneck economic growth in exchange for popular consent. If that growth slows too much, which it's starting to, no one is quite sure if the political system can survive. And Beijing has to keep up the growth, just as it makes a crucial and very difficult transition from being an export economy to one driven more by selling things domestically Separately, China still has an astonishing 99 million people living below the poverty line; if they had their own country it would be the 12th largest on Earth. They all have to be cared for.

Those are some huge and very immediate economic problems facing China. Anything that upsets the Chinese economy  — which a major U.S. financial setback would certainly do — is going to make the country's high-stakes economic challenges even tougher. Beijing would certainly like to have a healthy economy and grow its influence in southeast Asia. But if displacing American leadership in the West Pacific comes at the cost of taking a big economic hit, China would probably prefer the status quo of a geopolitically bothersome but economically healthy United States. And that might explain why you see Chinese leaders publicly urging Washington to resolve this crisis. For all the ways it could help China if the U.S. poked itself in the eye, it would likely hurt them much more.

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Max Fisher | October 8, 2013