FULL TEXT: Former Chief Executive Tung Chee-hwa keynote at Asia Society

One Belt One Road

Tung Chee-hwa was the first chief executive of the Hong Kong Special Administrative Region. (Photo by Xinhua)

Good morning, ladies and gentlemen.

The modern day US-China relationship began with President Richard Nixon’s visit to Chairman Mao Zedong in Beijing, in 1972. Since then, 9 presidents of the United States, and 5 leaders of China have worked to strengthen this relationship, knowing well that a good relationship between the two countries is not only good for the US and China, but also the world at large. Today, we can all take heart in the successful summit meeting between President Trump and President Xi this April in Florida. Although much work still needs to be done, it was a positive beginning. This is a good omen that the relationship under their watch can move forward constructively.

Listen to the speech:

Today’s occasion is for the purpose of examining how to take the US-China economic relationship forward. As there will be many experts on both sides who will talk about this topic, I will only speak briefly on it. Instead, I would like to spend some more time discussing how we can enhance overall US-China relations in the months and years ahead.

But first, let me talk briefly about US-China economic relations, as I see it. In January this year in New York, I gave a speech at a forum sponsored by the Chinese General Chamber of Commerce, which outlined my findings on the trade relationship between the US and China, and how that has negatively affected employment in the United States. The fact is that while jobs have been lost in the US to imports from China, the great majority of jobs losses in the US have occurred due to automation.

But at the same time, with the rapidly increasing foreign direct investment into the US from China, the increasing volume of US exports to China, and the increasing waves of Chinese students and tourists visiting the United States, all of these factors have boosted employment in the United States significantly.

The fact is, that the relationship is most certainly mutually beneficial.
Furthermore, as the years go by, it is increasingly obvious that the US-China economic relationship is becoming very complimentary. China is a nation of savers, with a savings rate of 50%. Whereas, at the same time, although the US will always be able to attract foreign direct investment, infrastructure needs will require huge inward funding.

Next, China has close to 20% of the world’s population, but only 7% of the world’s arable land. China has enormous appetite for imports of farm products and livestock. The United States, on the other hand, has an abundance of farm land. In the longer term, this will become increasingly complimentary.

China middle class is growing very rapidly, and in the near future, the size of the middle class market of China may draw level with the US market. The United States has established global brands and attractive designs. They should utilize their competitive edge to take advantage of the growing market in China. In fact, in the area of the consumer market in China, there are very little foreign restrictions in participation.

With the advances in shale oil production, the United States has very much become an energy surplus nation. As much as China is now trying to depend on renewable energy, nuclear energy and hydro energy, China will still require huge amounts of imports of hydrocarbons. This is another are where there is complementarity.

As time goes on, this complementarity and interdependence will only get stronger. Both countries should deliberately explore these opportunities in the years ahead.

Let me now move on to a talk on US-China relations, and how this relationship has evolved to where it stands today.

Looking back into history, the modern US-China relationship that was initiated in 1972 by President Nixon and Chairman Mao Zedong, was anchored by the common objective against the Soviet Union’s hegemonic aspirations. By the time of the fall of the Berlin Wall, this was no longer relevant. Since then, the US-China relationship has very much been anchored on an interdependent economic relationship. As China’s nation building progressed, trade in goods and services between the two countries began to grow. Investment from the US to China has always been a feature of this relationship, but now, Chinese investment into the United States is also becoming an important factor for both countries. At the same time, people to people exchanges between the two nations have grown. In particular, the large numbers of students and tourists from China to the United States have not only helped both peoples understand each other better, but also played a meaningful contribution to the US economy.

Looking into the future, the economic relationship between the two countries will always be important. But I believe the US-China overall relationship should not be anchored on the economic relationship alone. In fact, in recent years, the US and China have collaborated together in a number of important global areas, which has yielded some success.

Climate change is a good example. To start with, it was a US initiative which led to a determined joint effort between the US and China. This joint effort eventually led to the Paris Agreement, an agreement which will stand as one of the most positive and consequential global agreements in recent history. I know that the US has wavered on how to move forward. But I can only emphasize that it is very important that the US not only stays in the agreement, but continues to be in the lead.

There has been press speculation that China is delighted in the US withdrawal from this agreement because China will then become the undisputed leader. This cannot be further from the truth. The Paris Agreement is a serious effort to reduce the threat of climate change. It is an effort that involves almost every nation in the world. Throughout these efforts, the involvement of the US and China was crucial. America’s absence in the future will be very badly missed, and will set back the global effort significantly. Therefore I would exhort the United States to think carefully as she moves forward into the future. Whatever may happen, I believe the international effort will continue.

The United States is not happy with the contribution the country has to make to developing nations for their effort to combat climate change. The way I understand it, is that the compensation was justified because the CO2 that is in the atmosphere today to create climate change, is basically the result of the industrial activity conducted by the developed nations that took place decades ago and still continues. By the way, China will not be a beneficiary of this compensation.

Another example of collaboration by the two countries, was in 2016 when the US and China collaborated in West Africa to confront the Ebola disease outbreak. As a result of the efforts of the two countries, we were able to successfully overcome the disease before further damage was done.

Lastly, but most importantly, the other effort that the two countries are collaborating on very closely, is to create an environment to ensure there is a nuclear free and peaceful Korean peninsula. The difficulty of this effort is enormous. Without the US and China working together on this, the situation will be dire. But with the two countries working together, it is still difficult, but at least it will give us some hope.

Today, the fact is that the world is faced with many other challenges that need urgent attention. These include building a nuclear free world, preventing the militarization of outer space, managing cyberspace and enhancing cyber security, saving our seas from over-fishing, acidification and the build-up of rubbish, combating terrorism and managing global hot spots, and etc. No single country, can address these challenges alone. A multilateral approach will be necessary, and the involvement of the big powers is crucial. But initiatives agreed to between the US and China from the very beginning, can help the eventual success of our common efforts. I believe that contributing to global common good should become another cornerstone of our relationship.

But for the US and China to work closely together on many of the above challenges, the two countries need to understand each other a great deal more. Generally, what is our strategic intent? What is our economic and social development objectives? What are our challenges and worries? In other words, what are the things good friends know about each other. For each of the above challenges that we may be working on together, we need to be very open about each other’s motives and purposes, and share information more openly. Above all, we need to bear in mind that the ultimate purpose of working together is for a better world and for a better relationship between our two countries.

The general level of understanding has improved in recent years, but it is not enough. For Americans to understand China more, I would like to talk to you about China. Many people are unaware of China’s recent past. Therefore, I shall begin to address this issue with the date October 1st, 1949. This is the date when the People’s Republic of China was formally established. At that time, the country had just emerged from many years of civil war, and war of resistance against Japan. The country was devastated by war, exhausted, and basically bankrupt. Life expectancy of the Chinese people was only 35 years, infant mortality rate was as high as 20%, and the illiteracy rate was 80%. There was little provision for education and practically no provision for medical care and social services. Infrastructure was non-existent. The people suffered extreme misery and hardship. But what still remained was the spirit of the Chinese people, and this date marked the beginning of the rebirth of the nation.

68 years onward, where are we today? China today is the second largest economy in the world. 600 million people have been lifted out of poverty. Essential infrastructure has been built. Education, healthcare and other forms of social services are provided for. Life expectancy is now 76 years, the infant mortality rate is 9%, and the illiteracy rate is 4%. What’s more, a closed Chinese society has become open. Indeed, there has been an unprecedented expansion of individual freedoms – freedom of thought, freedom of movement, and freedom to pursue economic opportunity. The government has firmly committed itself to the building of a just society governed by the rule of law, and the protection of human rights. Never in the history of mankind has such progress been made in such a short period of time.

So where does China go from here? With a population of 1.4 billion people, and GDP per capita of $8,000, she is still a developing nation. Therefore, China will continue to work hard in nation building, and eventually join the ranks of developed nations. And this will take many years.

How can one explain China’s breathtaking success over these past 68 years? I believe the most important reason is because of China’s political structure. First, since Deng Xiaoping’s reform and opening up in 1978, a smooth transfer of leadership, based on meritocracy, has been institutionalized. Second, is the ability of the Chinese leadership to formulate sound long-term macroeconomic and geopolitical policies, and to effectively implement very complex policy initiatives.

The Communist Party of China has relentlessly pursued development goals for the people, and built a nation that all Chinese citizens can feel proud of. These efforts, together with the fight against corruption, and the determination to pursue the rule of law, have won the support of the people. It is no wonder that poll after poll has demonstrated that Chinese people’s support of the government is very strong.

It is true that mistakes were made along this, but adjustments have been made, and each time China has come out stronger.

You may ask, internationally, what is China’s strategic intent? China wishes to pursue peace and shared prosperity with all nations around the world, particularly with her neighbors. China has no hegemonic or ideological ambitions. China does not wish to impose her system or values to other nations. The truth is that hegemonic aggression is not in the DNA of the Chinese people. At the height of the Ming Dynasty, when China had 30% of the world’s GDP, and a fleet of ships cruising back and forth along the maritime silk road, China never exhibited aggressive intent to colonize or occupy territories. To the Chinese people, peace stands above all.

Unlike the United States, which has only two neighbors, China has 14 land neighbors. After years and years of efforts, China has settled territorial disputes with 12 of the 14. Those outstanding are in the South China Sea, East China Sea (with Japan), and India. The territory of today’s China, compared with what it was at the height of the Qing dynasty, has been reduced by one-third. Therefore, Chinese leaders and Chinese people attach great importance to upholding territorial integrity. In recent years, Chinese leaders have exercised enormous wisdom to contain territorial disputes without serious military conflict.

China’s military expansion is only for national defense purposes. The fact is, her military expenditure, at a level below 2% of GDP, is comparatively low by any standard. China recognizes that in order to pursue peace, she needs to construct a credible deterrent to prevent war against her by others. And this is what China is doing.

With this world view, China places great emphasis on seeking to build a constructive relationship with all nations. But a good relationship with the United States is particularly important. But this is not easy. After all, the people of the United States and China have different cultures, different histories, and the two countries are at different stages of development, therefore, our needs are different. At this stage it is even more important for us to understand each other better, and to trust each other’s good will and intentions more. On this foundation, a constructive relationship will always be possible. Too much is at stake for the Chinese and American people, and for that matter, for the world at large.

Let us support the efforts of the 9 US presidents and 5 Chinese leaders that have shaped a positive US-China relationship to where it stands today. Most importantly, let us support the efforts being made by President Trump and President Xi to make this relationship even stronger.

Thank you.