China Can Do the Most Good for the World by Putting Its Own House in Order

By Elizabeth Economy
Monday, December 1, 2008

This should be China's time to shine. The country is sitting on almost $2 trillion in foreign exchange reserves and may post a 9 percent growth rate this year, probably the highest of any nation. In the midst of a global financial crisis, the world has come to China's doorstep seeking leadership. Yet China's leaders have largely kept the door shut, arguing that Beijing can do the most good for the world by putting its own house in order. China wants to be a responsible partner, not a global leader.

Many in the United States have assumed that China wants to ascend to superpower status; and what better time for Beijing to step up? China matters more to the world every day -- not just on trade and finance but on climate change, food safety, nonproliferation and other global challenges. Yet China's leaders are right: They need to focus on the home front before they extend themselves globally, for their own sake and for ours.

Above all, China's leaders need to sort out where they are going politically. It is hard to lead globally when your domestic political system is in massive transition -- or, worse, turmoil. Beijing faces more than 90,000 protests annually as a result of endemic corruption and ongoing crises in public health and the environment. Exports, the lifeblood of the Chinese economy, are falling; layoffs are already in the tens of thousands, and China's stock market has lost two-thirds of its value over the past year. Chinese media report daily on a stream of new regulations -- to limit the ability of factories to fire workers, to manage state-run reporting or to restructure the public health bureaucracy. Yet all this tinkering at the margins has failed to reassure the Chinese people, or many outside the country, that the government has a clear plan for its political and economic future.

And until China's leaders address their domestic issues, we don't want them playing a larger role abroad. Their political system is in desperate need of transparency, official accountability and the rule of law. Before China's political institutions are in good shape, Chinese leadership abroad would probably introduce as many problems as it solves. The global financial crisis, for example, has sparked calls for Beijing to take a greater stake in the International Monetary Fund. On its face, given China's impressive balance sheet, this makes sense. Yet Premier Wen Jiabao's calls for IMF reform may signal a challenge to the fund's efforts to promote transparency and accountability in the countries to which it lends; China has routinely resisted calls for its foreign assistance to be managed in a transparent manner.

In addition to developing the political capacity for leadership, the time Beijing spends getting its house in order would allow China to develop the economic wherewithal to lead. Leadership means setting an example and often entails political or economic sacrifice at home for the greater good abroad. China has demonstrated little inclination toward such sacrifice, partly because it does not believe it has the economic capacity to do so.

Put another way, it needs time to expand its economy. On the issue of global climate change, for example, China is a strong supporter of -- and major beneficiary of -- the current international climate framework, and it is committed to the next round of negotiations. It has launched a domestic initiative to reduce the amount of energy it uses per unit of GDP and increase the role of renewables in its energy mix. Yet China avoids the tough economic choices embodied in adopting hard targets and timetables to reduce emissions, and it has sought free access to clean technology through a global fund supported by the developed world. Responsible player, yes; global leader, no.

Acknowledging China's reluctance to lead doesn't mean the world should do nothing but wait. China's path to good governance at home and leadership abroad will be fundamentally of its own making, yet our nation and others can help the process through cooperation where possible and pressure where necessary. Institutions such as the U.S.-China Strategic Economic Dialogue provide a framework for bilateral cooperation on economic, environmental and energy issues. The dialogue is young but has the potential to make significant advances on these critical issues. Meanwhile, on time-sensitive topics such as food safety, climate change or Darfur, the United States has to be prepared to work with the rest of the world to press China more rather than less aggressively to rethink or reform its policies.

Above all, the United States can do the most good by getting its own house in order. We have been free-riding alongside China on global efforts to combat climate change. Our lack of good governance domestically has increased our vulnerability to food and product safety crises and precipitated a global financial crisis. Our political institutions and financial bearings are not broken, but they have been seriously weakened. We and the world will pay a steep price until this country resumes a position from which it too can lead.

The writer is a senior fellow and director of Asia studies at the Council on Foreign Relations.

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