10/11/2012 09:36 am ET Updated Dec 11, 2012

Time for a Fresh Look At China

President Barack Obama and his Republican challenger Mitt Romney seem determined to outdo each other in China-bashing, while Congress is sitting on legislation that could require retaliation for China's currency manipulation. What we really need is a thoughtful analysis of how we can realign our relationship with China to the advantage of both countries.

There is no question that China employs predatory trade practices -- currency manipulation, domestic subsidies, discrimination against U.S. exports and copyright piracy -- to gain a trade advantage with us. We have done nothing about it primarily because we depend on China to finance our yawning budget deficits. Without that support, the cost of borrowing would skyrocket, pushing up interest rates and further rattling financial markets around the world. Recently, China has let its currency rise and reduced its purchase of U.S. financial instruments, but the basic mutual dependence of our two countries remains.

We have our problems and the Chinese have theirs. The Chinese government is now going through one of its major power transfers in which it is shifting to new leadership that appears to be committed to consensus government. This is a delicate process because the government has weak credibility. There are hundreds of riots in China every year sparked by corruption, incompetence and a growing gap between rich and poor that belies the government's avowed commitment to socialism. The lack of government transparency fosters suspicion and distrust among the Chinese people.

Thus far, China has been able to keep the lid on mainly with robust economic growth that has enabled hundreds of millions of Chinese to improve their economic status and aspire to better lives. But China has another 400 million people to move from the farms into the cities and the task is getting tougher. China's economy depends on exports, and as the world economy weakens, those exports are waning. Direct foreign investment in China is falling and manufacturing has declined for 11 consecutive months. The official data issued by Peking is bad enough, but anecdotal stories of unsold exports stacked high on China's ports suggest the real situation is even worse. And to top all that off, China is sitting on a housing bubble that, when it pops, will dwarf the one that laid our economy low.

The new government in Beijing must find a way to wean China's economy away from exports and foster a growing domestic market. We should look for constructive ways to help them accomplish this, such as encouraging development of an independent judiciary to address corruption, protect intellectual property and deter cyber espionage. It is also imperative that the Chinese government move toward greater democratization to enhance its credibility. The Chinese can learn a lot from us, but that requires a positive two-way relationship.

The next debate between Obama and Romney will be on international issues. I hope they will resist the temptation to lash out at China. The Chinese aspire to assert their proper standing as a full partner among the great nations of the world. Our challenge is to make them understand global leadership means they must play by global rules. We must clear and firm, not histrionic.

Jerry Jasinowski, an economist and author, served as President of the National Association of Manufacturers for 14 years and later The Manufacturing Institute. Jerry is available for speaking engagements