I’m considered a “panda hugger,” someone who rationalizes China’s current lack of democracy and argues that, despite all its selfish behavior, China should be considered by America more as a potential ally than a downstream threat. Being an economic determinist (I taught Marxism at Harvard in another life), I believe economics shapes politics more than the other way around. Thus, I tend to be patient when I see an autocratic regime marketizing its economy, especially when the economy opens up to globalization’s networks.

So when I draw up a list of regimes I’d like to see forcibly changed by the global community, China’s nowhere near the “to do” range. That doesn’t mean I want Washington to forgo pushing Beijing’s leaders in the direction of increasing political freedom and transparency, it just means that I have more faith in the transformative power of markets than others do, so I don’t argue for picking fights with China on that score when I think there are so many other, more urgent situations around the planet today that we could collectively address.

“Panda sluggers” refers to those politicians, writers, and activists who make just the opposite argument: China has had plenty of time to change politically in a manner commensurate with its embrace of markets and globalization. If Beijing’s ruling elite has managed to keep such a firm grip on political power, then maybe it’s really cracked the code on “authoritarian capitalism,” meaning we’re looking at an inherently antagonistic model of development. If so, America had better wake up to that reality and start combating China’s “soft power” influence-peddling around the world.

This view dovetails with trade protectionists who say that Washington must confront Beijing over its unfair trade practices and defense hawks who say similar things over China’s rising military spending. My counterargument? When America was a rising power around the beginning of the last century, we were highly protectionist. Now that we’re advanced, we’d like everybody else to follow our example. Fair? All things being equal, yes. But all things aren’t equal when you’re trying to catch up, the way China is today. I say, if you talk them into becoming capitalists, then you have to live with the consequences and be patient.

What concerns me most about this ongoing debate is the potential for the perfect triggering crisis to come along and decisively shift public opinion in favor of the “slugger” position, launching America down some path of economic retaliation against and/or military confrontation with China. Obvious security situations spring to mind, such as North Korea’s nuclear program, Iran’s nuclear program, or some significant U.S. military intervention in Pakistan—a longtime strategic ally of China.

But a more likely trigger is an extended economic downturn in the United States, or a financial panic in China following the bursting of some stock market bubble. If seriously threatened, might China decide to divest itself of U.S. currency—China currently holds $1.4 trillion in U.S. dollar reserves—sending the value of the dollar into a tailspin? No one knows for sure, but intelligent observers realize that, as former treasury secretary Lawrence Summers has put it, there basically exists a financial “balance of terror” between our two economies, meaning that when either of us pulls the economic trigger, we may well both end up with fatal wounds.

Why China Matters