SCMP | Hands Across Oceans

release time:2020-06-15

By Edward Tse and  Thomas W. Pauken II

June 11, 2020

Originally published by South China Morning Post on June 11, 2020. All rights reserved.

As political tensions rise amid the pandemic, relations between the United States and China have worsened at the federal level.

Nevertheless, based on our interactions with our clients, we see many from both sides continuing to support collaboration at the local level – between cities, provinces or states. Despite the rhetoric at the federal level, a number of local American officials looking to rejuvenate the economy still welcome Chinese investment.

Texas may be a deep red state that voted for Donald Trump to be president, but it nevertheless advocates closer trade and investment ties with China, through sister cities.

Houston, the fourth-largest city in the US, has substantial engagement with two Chinese sister cities, Shenzhen and Shanghai. And China is the second-largest trading partner of Houston, Texas. Shanghai donated medical supplies to Houston in the fight against Covid-19, for example.

Last October, Chinese Premier Li Keqiang met foreign business executives, including Evan Greenberg, chairman of the US-China Business Council, inviting them to seize opportunities in China.

This echoes US companies’ willingness to invest in China, as well as the recognition that foreign participation is key to establishing China’s technological leadership. Meanwhile, Beijing issued guidelines to cut red tape and protect trade secrets for US companies.

During his recent press conference at the end of the National People’s Congress, Li said that despite talk of a looming Cold War, there is room for bilateral economic cooperation. A decoupling of the two major economies would do no one any good, he added.

Local economic dialogue can enhance the understanding between ordinary Chinese and American citizens. In January, an article in Scientific Americanchallenged Washington’s “China threat” narrative, saying that far from “stealing” from the US, China has contributed intellectually and financially to US scientific production.

Seven of the 10 most frequently acknowledged funding agencies in US and China research publications were Chinese. If research ties with China are cut, the US scientific community has more to lose than gain in the long term.

However, in our conversations with a number of Chinese companies, they remain enthusiastic about investing in the US as long as federal regulators do not halt their projects over national security or other concerns.

The US remains a potentially profitable market for many. The Brunswick Group, however, also advises that Chinese businesses seeking to expand overseas must “bring more value to their employees, suppliers as well as local communities, and actively tell their own story”.

Chinese consumer electronics maker TCL Corp is expanding its supply chain in Asia, Africa and the Americas. Li Dongsheng, founder and chairman, believes that global markets will rebound in the second half of the year, and that expanding the supply chain in major economies is more critical than “simply selling products to them”.

Likewise, increasing Chinese investment in the heartland of America could help ease bilateral tensions.

Even as many Chinese fixate on the nation’s impressive economic progress, they could show more empathy with the US, especially Americans in the rust belt whose lives have been affected by the hollowing out of manufacturing. Chinese students in the US, for example, tend to keep to themselves, and are often unaware of the social realities in the US.

Fuyao, a Chinese automotive glass producer, operates a plant in Ohio that was the subject of the documentary American Factory. At the plant, it was initially difficult for Chinese and American workers to fully understand each other. Yet, the two sides tried to make things work, and were ultimately able to reach the same conclusion when it came to making a critical decision about the company.

Source: South China Morning Post

Having been big-time buyers for US residential and commercial properties, Chinese could also invest in US-based public-private partnerships. “Chimerica” – a term coined by scholars Niall Ferguson and Moritz Schularick to describe the deep partnership between the two economies – remains a possibility at the local level, though probably not at the federal level, at least for the time being.

Of course, not every cross-border investment will be easy and ultimately successful. Some investors will encounter challenges, while others will improvise and find solutions. Ultimately, people’s efforts, empathy and togetherness will go a long way.

Given the riots and protests in the US, some people may be having doubts about whether this is a good time to invest in the country. Investors are naturally concerned about social stability and may prefer to take precautionary measures, such as joining hands with several Chinese companies to form a peer group, instead of proceeding alone.

Clearly, the current situation further complicates Chinese companies’ decision-making. However, the general American public, especially those in the US heartland, probably need more economic help than ever right now.

Dr. Edward Tse is founder and CEO of Gao Feng Advisory Company. Thomas W. Pauken II is a commentator on Asia-Pacific affairs and geopolitical consultant based in Beijing, China. He is the author of the book, US vs China: From Trade War to Reciprocal Deal

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