What Chen Guangcheng Means for the Global Economy

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www.ChinaAid.or / Handout / Reuters

Blind legal activist Chen Guangcheng, in an undated photo, holding a government legal document about the protection of disabled persons

Chinese human-rights activist Chen Guangcheng is a brave man who has taken on China’s brutal authoritarian government and suffered personally for it, but beyond winning the hearts of sympathetic admirers around the world, his impact has largely been local. That changed, however, when he made his dash for safety from his house-prison last week and ended up under the protection of the U.S. Of course, from his standpoint, it makes perfect sense to seek out the Americans. Who else has the political will, economic clout and just plain chutzpah to stand up to China on his behalf? Yet in making that fateful choice, he has inserted himself into the complicated U.S.-China relationship, and therefore, into the global economy.

How’s that? Whatever may impact the bilateral relations between the world’s two biggest economies matters to everyone. We can’t yet tell how badly the Chen case may sour the relationship. U.S. Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner landed in Beijing on Wednesday for the regular Strategic and Economic Dialogue between the two countries. The forum is meant to forward Sino-U.S. cooperation, but Chen’s status is likely to overshadow the many other important issues in their complex relationship.

(MORE: How the Chen Guangcheng Case Will Test U.S.-China Relations)

That remains the case even though the two sides appeared to reach a deal on Chen’s fate on Wednesday. Chen left the U.S. embassry for a Beijing hospital, and will then be allowed to study at a university in China. Beijing seems to have given the U.S. assurances that Chen will be safe from the torments he had suffered at the hands of officials in his hometown. Whatever the final details of the arrangement, the Chen case still has the potential to create a lot of rancor. China is highly sensitive to foreign support for human rights in the country, which it considers interference in its domestic affairs. China’s Foreign Ministry demanded an apology from the U.S. and blasted that it “absolutely cannot accept” the American actions. As scholar John Lee pointed out, both sides had good reasons to stand firm. China’s leaders would fear backing down on Chen would be seen as a sign of weakness. The Obama Administration, under political pressure at home to support Chen, would face outrage in an election year and possibly damage its efforts to reassert American leadership in the Asian region.

At the same time, both sides have equally good reasons to find a peaceful way through the Chen crisis. Each economy relies heavily on the other. China needs American consumers to buy its exports, American investment to create jobs, and American technology to improve its industrial base. The U.S., meanwhile, sees the expanding China market as a crucial source of future job creation. American exports to China have increased fivefold over the past decade, while Chinese consumers are becoming an ever more important source of growth for companies ranging from General Motors to McDonald’s. China is also the largest foreign buyer of American government debt, with holdings of nearly $1.2 trillion. The two have far more incentive to forge a cooperative relationship than a combative one.

(PHOTOS: A Brief History of U.S. Presidents in China)

That is why Chen put the two countries in such a tough spot. We all know that Washington has tempered its approach to human-rights issues in China in part because of the Middle Kingdom’s economic might. The U.S. may slap harsh sanctions onto economically insignificant Burma for abusing democracy advocates, for example, but China gets off with no more than occasional slaps on the wrist. That’s the benefit China gets for being the world’s fastest-growing economy. Yet such a pragmatic policy toward China also leaves Americans with the uncomfortable feeling that it is selling out on its mission to support democracy and freedom. Chen puts that perennial conflict between realpolitik and idealism in American foreign policy into clear focus.

And a heated disagreement over the Chen case could easily spill over into the economic relationship between the two countries. Beijing and Washington already have a long list of problems to sort out on the economic front. The U.S. remains insistent that China engages in unfair trade practices that hurt American business. Washington has repeatedly claimed that Beijing purposely controls its currency to make Chinese exports more competitive. The two are also fighting it out over trade. Washington recently filed a complaint at the World Trade Organization over China’s restrictions on exports of rare-earth minerals. The risk is that a spat over Chen could escalate into a wider war over investment, trade and market access.

(MORE: What the U.S. Can Expect from China’s Next Leader)

And with the world economy still struggling to escape the Great Recession, conflict between the world’s two most important economies would be yet another hurdle to achieving a solid recovery. The world needs a U.S. and China engaged in supporting growth, not tossing up hurdles to investment and exports. Cooperation between China and the U.S. is also vital to achieving reform of the global financial system. Chen Guangcheng may or may not have realized how his escape from oppression might ripple through the world economy. But those ripples will be impossible to avoid.

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