Letter to China's new leader, Xi Jinping

Dear General Secretary Xi:

Congratulations on your elevation to the top post in China. If economic and strategic trends continue, you will lead China to an unprecedented peak in power and influence in the world.

Indeed, if your tenure extends two terms, until 2023, your country is expected to produce a gross domestic product of $40 trillion, 60 percent larger than the United States. Your middle class is expected to swell to a billion people, more than the combined populations of the US, Japan, Canada, and the leading European economic powers. Your country will probably even dominate in technologies ranging from biotechnology to renewable energy to lasers. Many expect you will be the most powerful head of state in the world.

But you face citizens around the globe who are saying, “Enough is enough.” First among them are the citizens of China. They’ve had enough corruption, income inequality, land expropriation, environmental ruin, human rights violations, and third-world-quality education and health care.

Second are the citizens of Western countries. They’ve had enough unfair trade, intellectual property theft, cyber espionage, bullying of foreign businesses in China, threats against the sovereignty of neighbors, lost jobs, declining benefits, and more.

Some people say you are going to have your hands full with your own citizens’ demands. But dealing with people in Western democracies will also determine your success in office.

These citizens have tolerated years of free riding by China – in the form of pirating technology, expanding exports by holding your currency down, and building companies with subsidies and trade barriers that bankrupt their firms.

In a 2012 European Union Chamber of Commerce in China survey, four out of five companies said China’s laws protecting intellectual property were inadequate. Two of three said they lost business in China because of market access or regulatory barriers.

The fact is, China is burning through global goodwill. People in Spain, Germany, the US, and elsewhere won’t forget how your policies and companies have bankrupted Western wind- and solar-energy companies.

If you push the citizens of the West farther, you will turn their simmering reservoir of goodwill into boiling hostility. They will not allow China to impoverish them in the next 10 years as they blindly did in the last 10. They can’t lose that many more jobs – more than 2 million in the last decade in the US due to the trade deficit with China and likely as many in Europe. Families can’t lose that much more income – down 6.7 percent in 10 years in the US, with China contributing to that loss.

Westerners will cry out – many already are – for action. And I think the patient efforts of their politicians to stop China’s present course of transferring the wealth of the West to the East will ultimately have to end.

Western politicians will reconcile themselves to the fact that China won’t change its state-controlled trade practices and its unfairly created competitive advantages for its companies.

These leaders will continue to profess “friendship” but tacitly act like enemies – counter your cyber-espionage, bar state-controlled Chinese companies from Western markets, intervene with government action to stop China’s companies’ destruction of their energy, aerospace, software, telecom, and other strategic industries.

How will you guide China in response to these tough reactions? Will you lead your people in rash acts of nationalism as you have during the anti-Japanese protests in September? Will you foment Chinese jingoism that leads to burning cars and boycotting global finance summits? Will you fail to address Western concerns and continue down the same path of depleting your best customers?

If you continue fanning the flames of nationalism and making provocative moves against neighbors, will you be able to retain control of your military-industrial complex? Can you guide your own people away from turning a cold war into an unthinkable hot war?

My point is that you can’t keep draining the West to build up China – even if you badly need economic growth to retain your regime’s legitimacy and to feed China’s poor. Such authoritarian nationalism has historically led to internal unrest or war, as we saw in World War II.

Even if you don’t want democracy, listen to the world’s citizens, and find a middle way to grow and prosper. Work with other countries to defuse economic and military escalation – and keep China’s star rising without reducing the West to a continuously falling standard of living.

Richard A. D’Aveni is Bakala Professor of Strategy at Tuck School of Business at Dartmouth College in Hanover, N.H. He is the author of “Strategic Capitalism,” his fifth book.