Although China enjoyed nothing like the intimacy of South Korea and Taiwan’s relationship with the United States, it recognized the crucial importance of winning American support and cooperation in its pursuit of economic growth. Just as its approach to economic reform was informed by pragmatism, so too was its attitude towards the United States. The Mao- Nixon accord of 1972 marked a profound change in their relationship, with the establishment of formal diplomatic relations in 1979, the settlement of property claims, the unfreezing of assets and the granting to China of most-favoured nation treatment. These steps created the conditions for China subsequently to join the IMF and the World Bank in 1986 and be granted observer status to GATT in 1982. The value of the United States to China was increasingly evident during the 1980s: it became the most important destination for Chinese exports; growing numbers of Chinese students went to study there, including many sons and daughters of the Party elite; while the US model of capitalism came to exercise a growing influence. The collapse of the Soviet Union only served to accentuate that influence, and the US’s prestige was further enhanced by the economic dynamism associated with Silicon Valley and the internet. Increasingly during the nineties, however, there was a rising tide of nationalist sentiment directed against the US, which found expression in the bestseller
The approach of the Chinese leadership, following Deng’s emergence as the paramount leader, had been built on caution and pragmatism, notwithstanding the obvious radicalism of the reform process. They eschewed shock treatment and grand gestures. Although drawing on elements of neo-liberalism, they resisted the Washington orthodoxy and instead pursued a very home-grown approach. [433] They were painstakingly meticulous in the way that they sought to introduce reforms by a gradual process of constant testing and trial and error. The state, in the time-honoured Chinese fashion, remained at the heart of this process of reform, even though the latter was to involve a drastic contraction in its economic role, with the share of government revenue decreasing from around one-third of GDP in 1978 to 17 per cent in 2005. [434] For the Chinese leadership, the objective of economic reform was never Westernization, but rather a desire to restore the Party’s legitimacy after Mao through economic growth, [435] and thereby to build a strong nation and state. [436] Political stability was accorded the highest priority. ‘[China ’s] modernization,’ Deng stated, ‘needs two prerequisites. One is international peace, and the other is domestic political stability.’ [437] The disintegration of the Soviet Union after 1989 only served to reinforce Deng’s belief in the vital importance of economic reform, an area in which the Soviet Union had palpably failed, and the need to avoid destabilizing political reforms, a trap which they saw Gorbachev as having fallen into. [438] The Asian financial crisis in 1997- 8 similarly confirmed the Chinese leadership in its aversion to shock treatment: that China should move with great caution in its financial reform and resist any premature liberalization of the capital account that would allow the free movement of capital into and out of China, and consequent floating of the Chinese currency, the renminbi (also called the yuan), which might lead to speculative attacks on the currency and the consequent destabilization of the economy, as happened to South Korea, Thailand and Indonesia – to their great cost – during the Asian crisis. [439] (As a consequence, the renminbi remains, unlike the dollar, yen and euro, for example, a non-tradeable currency.)
