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23 February 2012, Gateway House

China: What Nixon wrought

Forty years ago, former President of the United States Richard Nixon made a visit to China that has perhaps changed the whole gamut of U.S.-China relations. In the following years, China witnessed the rise of a significant middle class and became the world's second largest economy.

Editorial Advisor, Gateway House

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It’s hard to believe it was only 40 years ago this week that Richard Nixon went to China and opened up a nation that has become the world’s second largest economy.

For Americans like me, the event falls between the second by second recall you have from when Kennedy was shot in 1963 and the night when you heard Neil Armstrong say “one small step for mankind […]” as he stepped onto the surface of the moon in 1969. However, on a timeline of history, what is indisputable is the fact that Nixon’s visit changed immeasurably more lives than what Armstrong or Kennedy did.

Some scholars are recalling the trip this week. Minxin Pei of California’s Claremont-McKenna college notes that “Nixon could not have imagined what his gamble would unleash”, nor how difficult it is today for China to transform itself from producer to constructive member of the global economy.

The first candid pictures I saw of the Nixon trip were from Byron Schoemaker, a Washington D. C. neighbor and White House photographer on the plane. Sitting in his Capitol Hill townhouse we leafed through scenes of Beijingers on bicycles in olive drab suits riding to work in the February cold. Inside buildings they kept on the long underwear and scarfs and hugged thermos bottles of hot tea. There was scant central heating.

Fourteen years later when I visited Beijing as a correspondent, people were still riding bikes in Mao suits and huddling with hot water bottles in buildings. The hulking Capitol Iron and Steel Plant on the city’s edge rained down coal dust so thick, it dimmed by half the headlights of the official black Audi’s and the tin-box taxis on the streets. Visitors to the first Western auto plant started by Jeep, were stunned to see workers hand roll the chassis along an assembly line that could have served in a 1920’s Ford Model T plant.

Why does this matter today?

For one thing, it wasn’t just Nixon who couldn’t imagine today’s China. Even by the mid 1980’s, few could have guessed that China was destined to become the world’s factory. It was just a ripe-for-picking 1 billion market that every multinational CEO said he had to be in. No one said it would displace a huge portion of the industrial West.

No one foresaw that a command-and-control regime would lift some 300 million peasants out of poverty and create a middle class of another 200 million. No one imagined 50-story skyscrapers, clean fast subways, MAV trains, 30 huge new airports, very big Audis, Buicks, Mercedes, BMW’s Rolls and Bentley’s on the streets and millions of Chinese in the city sporting tight jeans, designer shirts, spiked heels, Gucci loafers and iPhones, would be the norm.

No one said China would command a 3 trillion war chest of mostly dollars making it banker to the world. When the pile got to $1 billion they said maybe $1.5 billion. At $2 billion they said maybe $2.4. No one now predicts beyond $3 trillion because the future seems infinite.

If you’re doing back-of-the-envelope dating, you can say the rise of economic China –the nation that dominates business and government and now security thinking — didn’t even really get going until 25 years ago.

So: What does that mean for other countries?

One, is that authoritarian government works. In just 25 years, Beijing and Shanghai have been entirely razed and rebuilt to the hilt. So gleaming are the cities that it’s now fashionable for Chinese billionaires, party leaders and Westerners like Rupert Murdoch to restore a hutong, the historic alley-way peasant flats that weren’t bulldozed–just as actor Robert De Niro turned New York’s Tribeca neighborhood from schlock to hip.

A second lesson is that it pays to have a powerful patron who enlists you in their crusade against the enemy – in this case Russia. For Nixon, “the enemy of my enemy Russia was my friend China.” There was a lot of official U.S. government aid going to China immediately after the Nixon trip. But that could never have built the nation.

It was U.S., European and Japanese multinationals and teamed up with Taiwan investors who erected Factory China. And it wasn’t until Deng Xiaoping cleared the way for private investment in the second half of the 1980s that the sustained boom took off.

Then, to make sure there was a place for all of those goods, the U.S. kept an open market for China–a 30-year dividend that rewards to this day. Europe and Japan were doing their utmost to keep China out.

And so to be blunt and chauvinistic about it, you can say the lesson of this “Nixon-to-China-week” is that the U.S. made modern China. It created the Goliath that took away the millions jobs U.S. presidential candidates say they will get back. America’s China strategy did pay off handsomely for investors and hooked U.S. consumers on cheap “Made In China” goods– while repulsing them with the idea that every dollar sent to China stole a U.S. job.

American presidential campaign reflects none of this history. Thirty years too late, candidates from President Obama to most of the Republican candidates tell voters they’ll get tough with China and restore the jobs with phrases like “reshoring”. The only rational response I’ve heard came from Jon Huntsman, the former U.S. Ambassador to China who, when he folded in his campaign, said that the U.S. had a long history of tough negotiations with China and that was the way it will be for years to come. America voters certainly didn’t want to hear that.

So what’s the answer? As a journalist living in Mumbai, its clear democratic India could never have politically adopted China’s command-and-control approach to development. So don’t blame India for not trying. It could have unshackled hundreds of regulations two decades ago and may be afforded an alternative market to China for investment. But that’s past history too. Friends say the national election in 2014 may launch a new brighter future, and everyone pours over regional election results for clues. No one of course pours over election results in China. There are none.

Yet as Professor Pei and other China skeptics point out, China also has large bills coming due. It needs to install a better health and education system, pay for the retirement of some 600 million peasants, create a rule of law and finally give voting rights. Call them the soft-side needs.

Whether India can use social tolerance, democracy, street-level ingenuity, a young population, a flexible service economy and modern factories to build its own growth model between China’s command-and-control and the West’s reliance on fully open markets, is the question ahead. What’s important to remember in this “Nixon week” is that China built its formidable economic muscle in a little over two decades, not the 40 years since it was “opened”. That means a balanced and committed India might do a lot in less than a generation.

Bob Dowling is an Editorial Advisor to Gateway House: Indian Council on Global Relations.

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