Is China our enemy?

In 1989, China’s regime followed Mao’s dictum, “power comes from the barrel of a gun,” shooting many hundreds of democracy proponents in Tiananmen Square. (Trump has called this a “strong, powerful government” quelling a “riot.”) Since then, even as China has modernized in many ways, its regime has become increasingly repressive, tolerating not the slightest chink in its absolute power. Its police state in Xinjiang is an Orwellian nightmare. Xi Jinping has made himself president-for-life. China bullies its neighbors, tightening its unlawful grip on a wide swath of the Pacific. It abuses world trade rules, its advance fueled by theft and dishonesty.*

So is China our enemy? Not exactly.

The Communist bloc, during the cold war, was our enemy. Its aim was world domination, ideologically, seeing the U.S. as a bete noir and wanting our failure or destruction. Putin’s Russia today, while non-ideological, has a similar outlook.

This again is not exactly true of China. While some regime elements do see us as conspiring to keep China down, that’s not exactly true of America. Wise heads in both countries understand there’s room in the world for both to prosper; indeed they’re in it together. Not a zero-sum game where one nation’s gain is the other’s loss. China becoming more prosperous and powerful doesn’t necessarily require America becoming less so. To the contrary, trade with a prosperous America is good for China. Thus a win-win mentality.

It’s not Trump’s mentality. This is why he’s a bull in the China shop. A lot of voices say he’s right to confront China on trade, and I actually agree, up to a point. However, Trump sees every thing we buy from China as China raping us; he wants it to stop. That’s idiotic.

The win-win logic is a key concept of economics, called comparative advantage. We buy from China what China is better at producing; China buys from us what we make best. Both countries benefit — even if one buys more than the other.

Do we lose some jobs to China? Sure. But the money U.S. consumers save buying cheaper Chinese goods enables more spending on local products and services, creating jobs. More than are lost. By messing with that dynamic, Tariff Man loses us jobs.

Nations are enemies when their interests clash, in a zero-sum sense. That’s not our situation with China. Again, we have a mutual interest in our bilateral trade. That doesn’t mean we don’t fight China on intellectual property theft, human rights, or territorial aggression. We can have those arguments while still expanding mutually beneficial trade and without being enemies. You have fights with your spouse but you still have intercourse.

The tragic stupidity of Trump’s China stance is that it’s the opposite. He wants no fights with his “great friend” Xi over things like Xinjiang or silencing dissent. Nor is he even really confronting China over intellectual property theft, which is the trade fight we should be having. Instead, it’s the intercourse he wants to curtail.

“Intercourse” doesn’t even begin to cover it, as elucidated in a recent Thomas Friedman column (https://www.nytimes.com/2019/06/04/opinion/us-china-trade.html). Our two economies are totally intertwined. We have huge investments in each other. Both economies rely heavily on vast, interlinked supply chains, each supplying to the other things necessary for their productivity. For example, Apple has products assembled in China; Chinese technology firms need U.S.-made chips. If we rip all that apart, Friedman says, “we’ll all end up living in a less secure, less prosperous and less stable world.”

But he fears that’s happening; stumbling into a new cold-war-enemy relationship with China that’s totally unnecessary. “The erecting of an equivalent of the Berlin Wall down the middle of the global technology market,” dividing it into separate and mutually hostile spheres.

Instead we should be working to coax China into full partnership with the rules-based globalist economic order. Which is really in China’s own long-term best interests. In this, a united front with all our allies would help. But Trump has antagonized them, picking trade fights with them too. (Britain, for one, now sees its trade relationship with China as economically central.) So we’re on our own.

Bad enough that Russia is a big enemy. China would be far bigger. Its economy is already as large as America’s and will soon outstrip it. Its population is more than thrice ours. China’s increasing global importance is an inevitability we must live with; making the best of it. And we can. If instead we opt for all-out battle, we will lose.

* Counterfeiting is a big industry — a major problem in my own business field, rare coins. Maybe bigger than we even know.

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2 Responses to “Is China our enemy?”

  1. Paul Landsberg Says:

    Insighful as always. The first interesting tests of the new idiocy will be Broadcom and Huawei. One article I read said that Broadcom had 900M$ in revenue at stake with China. IMO you can’t just plan how to survive a billion dollar hit to your revenue stream. I don’t recall the numbers for Huawei, but how they survive the animosity at the Trump level will be a key indicator on whether China & their key companies are better prepared to survive a trade war.

    Broadcom is going to get hammered in the stock market. Will that cause massive ripples in their R&D and pipeline? Possibly. Maybe even probably so given corporate America’s hyper-tactical focus.

    Trump. The gift that never stops giving!

  2. Tony Says:

    I’m not a fan of protecting intellectual property rights as I’d argue they don’t exist, but the win-win vs lose-lose scenario is spot on. Something the vast majority of vote seeking politicians don’t seem to understand, even though it’s a concept that was first explained about 200 years ago.

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