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Common fortunes

A closer relationship with China would benefit the United States

President Richard Nixon once remarked "If there is anything I want to do before I die, it is to go to China." Thirty years ago, President Nixon and Secretary of State Henry Kissinger fulfilled this vision by visiting the Middle Kingdom. Today, China has become an integral factor in many facets of American life. Some Americans see China as a potential threat to America's power. But a closer relationship between China and the United States historically enhanced the economy of the United States, exposed China to democratic values and will continue to promote America's national interests.

In 1979, the U.S. entered a painful stagflation - high inflation coupled with a high unemployment rate. The outcry against the Vietnam War and Watergate Scandal further shook Americans' confidence in the nation's political leadership. But the U.S. economy quickly rebounded. From the early 1980s to the 2000s, the U.S. created the largest economic expansion in recent history as the DOW increased from 1,000 to more than 14,000 points. The rise of China played a crucial role in this recovery.

In 1979, Deng Xiaoping led China out of Soviet style communism and boldly initiated a policy of global integration and economic reform. Since then, China's GDP grew by 8,200 percent. As a result, 300 million people were lifted of poverty.

Chinese businesses exported low-priced goods to Americans because of low production costs. Consequently, the U.S. enjoyed three decades of low inflation, American consumers had greater product variety and cheaper goods and American businesses benefited from low operation costs. The exporters were paid in US dollars, which the Chinese businesses exchanged with the Chinese government for the yuan. With the dollar reserves, the Chinese government then bought U.S. Treasuries. China's continuing support for U.S. bonds contributed directly to the low interest rates in the 80s and 90s. The low interest rate in the United States kept government financing inexpensive, and helped fuel business investments. Treasury Secretary Henry Paulson commented that the Chinese have heavily invested in American securities, including U.S. bonds, because China has been optimistic about America's prospect. It is a vote of confidence.

As China's economy transitioned toward manufacturing, American businesses have converted into the world's service providers. American firms now frequently outsource simple tasks to China so they can focus on more profitable processes.

Despite benefiting from China's growth, many Americans still hold reservations about China. How could a nation governed by autocracy achieve such an economic miracle?

China's success is rooted in balancing the forces of central command and market capitalism - the yin and yang of Chinese government policy.

Central command enables rapid execution. For instance, in 1979, Deng Xiaoping decided to transform a fishing village in southern China called Shenzhen. Today, the world's second tallest skyscraper is being built in Shenzhen, where Apple, IBM, Lenovo and other multinationals have a significant presence.

Although the central government enabled expedient policy implementation, the introduction of a market economy further propelled the Chinese economy forward. State-owned enterprises were sold to private firms with superior technical and managerial insights. Competition in China rewarded profitable companies and weeded out money losers. Overtime, China has become the world's manufacturing hegemon.

Although becoming more open as a result of America's influence, the Chinese government sacrificed some democratic values in order to preserve the social stability that has been vital to its economic growth for the past three decades.

This result is not surprising. China's recent history is marked with chaos. From the Boxer Rebellion at the turn of the century, to the Japanese invasion during World War II; from the bloody civil war between Chang-Kai-Shek's troops and the Red Army, to the endless political prosecutions during the Cultural Revolution, the current Chinese administration has become sensitive to any signal that would thwart the country's stability.

The relentless desire to maintain stability often conflicts with the duty to protect individual rights. But human rights not only include political and religious dimensions, but also basic necessities such as food and shelter. As mentioned previously, China lifted over 300 million people, a number equivalent to the entire American population, out of poverty in just 30 years. That constitutes an unprecedented service to human welfare.\nThe combination of China's need to sustain economic growth and America's desire to maintain a major global presence has given us, the young Chinese and Americans, a new vision.

It is a vision of closer engagement. In that vision, more American professionals will work on business deals in the financial districts of Hong Kong. Likewise, more American brands will open up factories and stores not just in Beijing and Shanghai, but also in small cities in western China.

In that vision, more Chinese students will study in America. They will not only learn engineering and the sciences, but will also be exposed to democratic ideals fundamental to the free Western world, which is the best way to spread America's influence.

In that vision, Americans will learn from the Chinese on financial prudence so America's national savings rate can once again be an engine for the economy. The Chinese will continue to cultivate their creativity by learning from Bill Gates, Steve Jobs and other American inventors who do not define life as losing or winning, but as quitting or staying.

As a Chinese student blessed with an American education, I will faithfully preserve, protect and promote the friendship between China and the United States.

Paul Chen's column appears Thursdays. He can be reached at