The best approach to handling our economic relationship with Beijing must be (this ought to be too obvious to need saying, but . . .) shaped by the understanding that under the current regime China is not America’s friend, and that’s not something that is going to change any time soon.
Beijing’s ambition is to replace what it regards as American “hegemony” with a Sino-centric world order, reshaped in a way that reflects its own priorities, an ambition that will not be blunted by closer trading ties. Indeed, the more those ties increase U.S. dependency on China, the greater the danger that Beijing will be tempted to speed up along its current course.
One of the reasons that Putin felt that he could risk invading Ukraine was Europe’s dependency on Russian natural gas. At least in 2014 (the year of the first Russian invasion of Ukraine) he was proven right.
A realistic approach must also involve the recognition that, economically, a significant decoupling from China is desirable but will take quite some time. Sadly, that doesn’t seem to be the thinking behind a conference that is being held in Shanghai this week. The main mover behind the conference is JPMorgan, and the idea, according to the Financial Times, “underscores corporate America’s attempts to keep plans on track in the world’s second-biggest economy.”
If those plans involve anything other than preparing for a strategic retreat, however camouflaged, they are not plans, but dangerous illusions.
The FT:
“The timing dovetails well with the softening of rhetoric between the US and China, with Biden calling for a thawing”, said Han Lin, a professor at NYU Shanghai. But he added: “We’ve seen this story before, where things improve and then get worse, and it’s the uncertainty that keeps multinational corporations on edge”.
JPMorgan’s own executives have highlighted the fraught relationship between Beijing and Washington. Tension between China and the US was “something that we have to learn to live with because it’s not resolvable, but hopefully through dialogue that tension becomes constructive”, chief operating officer Daniel Pinto told investors this month.
Mr. Pinto is correct that that tension is “not resolvable,” but quite how “dialogue” is meant to make it “constructive” escapes me.
And as for that dialogue, well, some Chinese CEOs are due to show up, as are their U.S. counterparts, but:
No Chinese government figures are due to speak at the conference, which has in previous years been addressed by a representative from the finance ministry and an adviser to the State Council, or cabinet.
Under China’s economic model, a form of harnessed capitalism far closer to fascism than communism, it is the state that counts, not the CEO. Talking to a Chinese CEO is, when it really counts, a meaningless exercise. All the U.S. attendees are doing at this conference is humiliating themselves and providing further evidence to the Beijing regime that it has the upper hand. Quite what is “constructive” about that escapes me.
Meanwhile, via the FT:
Raids on the Chinese offices of several consultancies have made US firms more wary about operating in the country, with the US Chamber of Commerce warning last month that a new counter-espionage law “dramatically increases the uncertainties and risks of doing business in the People’s Republic”.
That’s not quite right. The raids don’t increase the risk; they merely make them more visible.