No matter how you call it (competitor, rivalry, enemy, conflict or challenger), the best way to get the most out of a Sino-US relationship and to avoid head-on conflicts is for the US to make the best use of China, and also for China to make the best use of the US.
Beat China Vs Use China
The common saying is “If you can’t beat it, join it!” I want to modify it to “If it costs too much to beat it, use it!”
I am not too optimistic about US beating China in areas it does best, like lower to middle ends of speedy manufacturing, like this interesting interview with Thomas Friedman shows. Theoretically, the US can always beat China with more innovations but there is a problem: The rate of original innovations can never beat the rate of imitations. Inventing “new to the world” goods or services takes at least ten times longer to achieve than imitating or copying others. This is not entirely because China steals — it does it whenever possible with low cost — but more often because whatever the US does would inspire China and push Chinese to follow suit and even worse, to improve it. Again, improving something original costs much less than coming up with the original.
This is why I believe it would cost too much for US to beat China economically. Exactly because of this dim prospects in pure economic competitions, there will always be Americans who want to leverage the “allies,” “values,” and “ideologies” weapons. Some also bet on regime changes.
But to “use China” is another story. It costs little to bring immediate economic benefits to both the US and China, thus it is what is called “win-win” and also defines a “stable competition”. Otherwise the two will always want to destroy, or to figure out ways to do that, each other and bring the world the biggest and messiest chaos in human history.
Only when the US sees more utilities and higher payoffs from using China than from smashing China, will it stop itself from thinking of how to destroy China, like this essay published by the Atlantic Council is all about. The same applies to China.
Making The Relationship Complementary
The strengths and weaknesses of both sides are already known as public knowledge by now. Let us look at the big picture: The US economy is heavily service oriented, while China has become a global manufacturing powerhouse — but the quality of its service industry is generally low. Right there I see a big opportunity for the two economies to be complementary of each other.
Being complementary means rebalance, and rebalance is what is good to both. The US needs to bring at least some manufacturing back home, those that have a special or unique US demands, those that are crucial to national security, those that global transportation will entail heavy carbon trail, and those that are luxury or with special need for higher quality.
Let American Quality Prevail
Speaking of quality, this is what we should emphasize about “Made in the USA.” Good quality results from three reasons. First of all, detailed rules and regulations are there in the US to ensure good bottom line quality of inputs and outputs, even for cheap priced goods.
Secondly, American enterprises, especially the large ones, constantly make incremental innovations to improve quality, duration, convenience and utilities of their products.
Thirdly, American society honors honesty and trust but if proven lying it will give harsh penalties. In other words, the cost of lying is higher in America than in China.
“Made In USA” & Reverse Exports to China
If the US can let Chinese entrepreneurs (mostly their capital) enter its manufacturing industry, that would be good news to both US the China. For one thing, it would create manufacturing jobs that the US wants. Of course, factories in the US cost more to operate, at least in the short run, but because US management can do a better job than the Chinese (plus the other three reasons above), the quality is expected to be higher.
There are something else beyond quality: Even the same goods both China and the US can make and with exactly the same quality, the US version can charge a premium price not only in the US but even more so in China, because there has been a huge — but so far unfulfilled — overseas market for goods “Made in USA.”
Every time I brought products from the US back to China as gifts, the first thing the recipients normally did was to check out the package signs, labels or trademarks to see if it was “Made In USA” or “Made In China.” The former would bring extra excitement and add some social capital for bragging to others, while the latter will not. To my best knowledge the same holds true for Asian consumers, although the Chinese are the worst in discriminating the labels, partly because almost everything nowadays is “Made In China”.
The premium price with “Made in the USA,” but not “Made in China,” can cover the costs, even after taking the logistic costs into account. The Biden administration can try to strike a deal with Beijing to allow zero or very low tariff for goods reverse exported to China.
Creating Jobs For American Working Class
Among other things, bringing manufacturing back to the US is the best way to bring working/middle classes back to the economic stage. Let’s face it, some people are best working in manufacturing — with crystal clear and sometimes even self-illustrated job assignments, concrete and quantifiable outputs, regular, fixed and pre-negotiated pays and self-presented needs for coordination and cooperation. How about workers with different ideologies, like one is liberal and another conservative? They still must work together to make the production possible. Hopefully this will draw them nearer than before.
Sending US Service Firms to China
The service industry is much weaker and less developed in China than the US, especially in the fields of legal service and healthcare service. I wish China’s courts, prosecutors and lawmaking processes all hire American legal consultants to make the laws more fine toned, with more specific, detailed codes so they can be literally followed by all courts and any judges. A joint Sino-US venture would greatly improve the legal efficiency in China.
However, this is unlikely to happen, given China wants to put the party above the law and likely will reject any US consulting as interferences.
Send US Brands of Healthcare Service To China
Much business can be done with healthcare service, which is a trillion dollar business and yet the Chinese brands are simply not there yet or are very weak. You visit the hospitals, especially the top ones they called 3-A hospitals, in the big cities of China and you always see chaos and long lines. The quality of service is no comparison with the US counterparts. It is lower even than Thailand.
The demand for healthcare services is there and very high, all we need is to match it with supply. The US healthcare brands of hospitals in China can quickly grab considerable market share and introduce more market competition to the domestic hospitals and clinics, which is exactly what China needs. As the first step, US brands can enter top tier cities targeting upper middle class consumers, and then expand to other markets depending on how well the first step went. I can envision the admiring smiles of Chinese patients out of the clinics and hospitals with a totally different experience from American entities, which in turn would push domestic hospitals and clinics to change.
US healthcare brands need to have sufficient number of American doctors and nurses to make the difference. Believe it or not, a western face still matters today in China, as the upper middle class consumers would like to be treated by a foreign doctor speaking English as the native language, rather than a Chinese doctor with broken English. For them, that’s a sign of value they paid for. If the doctors in China need to talk to doctors in the US remotely for diagnosis or surgery, only American doctors can do that.
The US should press Beijing to open the healthcare market to American brands as Chinese crave US brands and are capable of paying for premium services with their income level.