Engaging China through Relationship

Mature, public conversation about issues that matter is foundational for democratic society. I am delighted that Mark Zuckerberg's "A Year of Books" offers such an opportunity. To contribute to that dialog, I will offer commentary on each of the readings proposed by Zuckerberg.

The eighth selection in Mark Zuckerberg's "A Year of Books" is Henry M. Paulson, Jr.'s Dealing with China: An Insider Unmasks the New Economic Superpower. While I anticipated a greater dissonance between Paulson's worldview (that of an investment banker and former U.S. Treasury Secretary) and my own (a former priest and missionary), I found this book exceptionally readable and engaging. Occasionally, I found myself looking for a footnote or endnote, some citation to support Paulson's claims, but I think that the lack of endnotes and bibliography actually focused the narrative on the story of Paulson's relationship with the Chinese and, thereby, made it more accessible, even though the book clocks in at just over 400 pages. In fact, I think that the absence of endnotes and abundance of names makes the book precisely about relationship and the stories of the people included.

Picking up the book, I did not consider myself knowledgeable about China, or investment banking, for that matter. I was eager to learn more. Although Chinese culture is deep and ancient, Paulson gives a nontechnical understanding of China's geography and political and economic history for the last 50 years. Paulson's personal involvement with historic episodes was also engaging. As the September 11 attacks unfolded, he was on a corporate jet bound for Asia. He recounts his first visit to China after the SARS epidemic. He was secretary of the Treasury Department during the economic crisis of 2008, administered TARP and other steps to salvage the U.S. economy, and recounts how the Chinese related to us during and after these pivotal events. Paulson's high-level dialog with the Chinese also set the stage for advancements, like the climate change agreement signed in 2014. In other words, Paulson tells the story as an insider in the relationship with China, and it is a great story. Paulson's commitment to working with China and his understanding of the country and its leadership is evident.

Dealing with China promotes Paulson's view of active engagement with China. The United States has important choices to make about our relationship with China. Paulson fairly criticizes politicians and other political actors who grossly over simplify the issues and promote a blind fear toward China. He argues that engaging China is best for our interests as well as China's self-interest. Rather than meeting in fear and misunderstanding, we can (and should, argues Paulson) build better economic engagement between the U.S. and China, which has the happy outcome of reducing risk for violent conflict between our nations. I found his argument compelling.

Paulson also offers numerous stories, from his time at Goldman Sachs, about working with Chinese SOEs (State-Owned Enterprise) corporation in their IPO (Initial Public Offering). China's desire to successfully navigate these steps allowed for revisions of corporate structure (often with great pain and displacement to the poor), implementation of sound accounting practices, and greater transparency.

Paulson's description of China and its economy give evidence to the "More Revolution," described by Moisés Naím in The End of Power, Zuckerberg's inaugural selection in his "A Year of Books." China's economic growth has lifted hundreds of millions of people out of poverty. This is not to diminish the enormous poverty that still engulfs other hundreds of millions of people. In fact, despite having more billionaires than any country save the U.S., China's per capita gross domestic product, Paulson tells us, ranks 80th in the world, just ahead of war-torn Iraq, highlighting as well its growing economic inequality (pp. 269-270). Rising income means rising expectations for education, quality of life, and access to consumer goods. Paulson and Naím would likely concur that this will demand greater freedom for the Chinese as well.

Many of Paulson's colleagues suffered during the Cultural Revolution (1966-1976). Gifted persons in business and governance were sent to state farms to labor in harsh conditions. Those same persons now in positions of power, says Paulson, know the inevitability of reform and progress toward freedom. Since the events in Tiananmen Square of 1989, captured in the icon of a brave man standing in front of and stopping a row of tanks, many in the U.S. have paid little attention to the day-to-day challenges of political and religious dissidents in China. Paulson contends that even their situation is improved by U.S. engagement with China. Paulson recounts his hand in seek Yang Jianli's release (pp. 220-222), and he tells of the irony that Jiangli thanked him for the very things that his persecutors had thanked Paulson (p. 252).

With China's enormous population and explosive growth in its cities, China has 171 cities with more than a million residents. Issues of urban sustainability are essential for the quality of life in China. Paulson, a committed conservationist, and the Paulson Institute, founded by Paulson at the University of Chicago after his service in the Bush Administration, have worked closely with Chinese leaders to measure urban sustainability. Paulson writes, "To achieve the modernization it seeks, China needs a new urbanization model that is economically sound, socially just, and ecologically sustainable" (p. 270).  This work may prove important for the United States as our population grows.

Paulson's book offered some surprises as well.

• Paulson surprised me with his commitment to conservation and environmental protection (see especially pp. 116-131).
• Paulson surprised me, having visited the country more than 100 times, having offered many cultural observations about working with the Chinese, and having written this lengthy book, by not being able to speak Chinese.
• Paulson surprised me with his concern for the importance that he places upon listening to the Chinese, or, as a businessman, to whomever is his client. To make the "sale," he had to listen deeply to what his counterpart really wanted.
• Paulson surprised me with just three references to Christianity in China, given the difficulties that the underground Catholic Church faces (pp. 353, 355, 368). Likewise, he did not refer in great depth to China's growing military. He maintained a laser-like concern on the economy. He is remarkably convinced that our concerns about religious freedom and China's military will be resolved by trade that opens China to the market.
• Paulson surprised me with his commendable work in Tsinghua University to form better business leadership.

Of a timely nature, as the Senate procedurally blocked President Obama on the Trans Pacific Partnership, Paulson avidly cheers for the TPP's approval (p. 396).

Dealing with China is an important book about an even more important issue. Our relationship with China, for better or worse, is vital for what will happen in the coming years as we are referring to the world's most populous country (China) and the world's #1 and #2 largest economies. While ranking in economic power is not the most important factor, Paulson makes a compelling case for why we should not be afraid of China and how it is in our (and their) interest to find ways to work together. It is better that we work out our differences in trade than in a military arena. While Paulson does not paint vivid portraits of Chinese culture, he does show convincingly that we can meet and work with each other in business.