On July 16, 2021, the Biden Administration issued a warning to American companies in Hong Kong, asserting that China’s national security law had ostensibly rendered the Special Administrative Region no longer a safe place for commerce. The very next day, at an exclusive interview, the President of the American Chamber of Commerce declared that it had bought an office in an A-list district of the city – and pledged that American businesses remained fundamentally committed to doing business in one of the most lucrative, vibrant commercial hubs in Asia, if not the world.
At times like these, it is tempting to think that U.S.-China relations are irreparable – that the sentiments shared by people across both sides of the Pacific are vastly in favour of decoupling, of escalation in tensions, and of brewing acrimony. To think as such would be understandable given the rhetorical jostling and precipitous hostility emanating from bilateral “dialogues” between senior representatives in the Chinese and American administrations.
Yet it is imperative to recognize that such attitudes are by no means shared by all – especially not among the business community, whose interests are inherently intertwined with the continued coupling and economic synergy between the two largest national economies in the world. While the political establishments in Beijing and Washington alike may be gravitating towards viewing the other as a systemic threat to their modes of governance, the trans-Pacific business community diverges apparently from the brewing consensus: decoupling is neither an option, nor in the interest of the plethora of stakeholders involved in the $650bn+-in-value bilateral trade relationship.
The bifurcation is apparent – yet by no means surprising. Politicians have much to gain from emotive, impetuous ostracization of the “other” – whether this be nationalist bureaucrats invoking anti-Western and anti-American imagery to castigate foreign capital and governments, or American politicos seeking to exaggerate the risks posed by China to American hegemony and the ideological differences between Beijing and Washington in how governance ought to be conducted. The zeitgeist of contemporary politics requires there to be a Bogeyman, which necessarily lends unifying credibility to those who seek to construct and demonize the threat it poses to national order. Political figures thrive off division, tribalism, and – above all – defensive paranoia from the people. It is hence unsurprising, then, that select politicians from the Trump administration have portrayed China as “a threat to American freedom”; or that the actions of the G7 have been implicitly compared with those of the Eight-Nation Alliance that ransacked the Forbidden Palace at the cusp of the 20th century.
On the other hand, the business community thrives on seeking common ground and mutual understandings. On the front of business, it need not be a zero-sum game – indeed, Chinese and American firms have much to gain from continued, deepened collaboration over supply chains, ground-breaking technological research (in which managed competition, not unbridled rivalry or conflict, should be the modus operandus), and opening-up of consumer and capital markets.
The deepening of bilateral trade is vital in ensuring the wellbeing and welfare of consumers and producers across both sides of the Pacific. Incidentally, China and America alike enjoy substantial benefits from the vast volumes of trade. Foreign trade accounted for 30% of China’s GDP in 2020 – a decline relative to a decade ago, yet by no means insignificant. Even as the country shifts towards self-reliance and domestic consumption, it remains the case that China depends upon the U.S. for the supply of core manufacturing components and technology for consumer goods. Much of the revenue derived by Chinese firms through overseas sales is in turn reinvested into R&D, which actively benefits the wider populace in the form of innovative, groundbreaking research. Similarly, Chinese goods and services have permeated the everyday life of Americans – certainly to the benefit of the latter. China was the largest supplier of American imports in 2019 ($452bn) – a trend that, while dented by Trump’s final years in office, looks set to continue as the former leads the global recovery from the COVID-19 pandemic.
On the front of investment, the Chinese and American markets alike generate substantial benefits for their counterparts across the ocean. Recently overtaking the United States as the world’s leading destination for new Foreign Direct Investment, China offers investors a sturdy, deep, and consolidated site of capital gains – yet its strengths should not be overstated. The total stock of investment in America remains indisputably larger, with securities and stocks in the country a go-to for Chinese investors seeking to maximize profits in a jurisdiction undergirded by sound rule of law and transparency. The latest bans on Didi and other Chinese companies listing on Wall Street have certainly cast shadows over the state of financial integration – yet the prowess and initiative of private capital in China cannot be under-estimated. American banks, firms, and funds would benefit from harnessing – as opposed to rebuking – Chinese capital; this much is clear to the majority of leading investment banks in the United States.
Given the above, the question then becomes – what, really, can the business community do? There needs to be a new “Beijing-Washington Consensus” – one that transcends nationalism and geopolitical concerns, that commits to insulating commercial ties from political manipulation. Transactional and mutually beneficial economic activities should be firewalled from the rapidly expanding quagmire of ideological and strategic confrontation undertaken by national governments. Firms should seek to identify and pursue ventures that bolster and strengthen bilateral ties between civil societies and private actors in the long run.
All of this is easier said than done, of course. The Chinese state remains heavily intertwined with the private sector – as epitomized by the swiftness of the recent crackdowns on both Big Tech and education firms within the country. Depoliticization of the private sector cannot possibly occur without the tacit consent of the relevant authorities. Relaxing regulations over stock exchange listings, lowering the barriers to entry for foreign firms in China, and stepping up intellectual property protection are necessary reforms that could only be undertaken by the state. While Chinese firms and capital could certainly seek to circumvent such formal structures, this would certainly be a Herculean task – though a more viable alternative for the short- to medium-term, perhaps, is for private equity and capital to identify and invest in projects that yield not only private returns but also public gains to the “99% in China”, a move that would help quell the uneasiness of administrators and regulators in Beijing over the ethos of over-commercialization permeating the country.
On the other hand, Washington could well emerge to be the primary obstacle to American firms expanding their presence in China – from being inadvertently dragged into the cross-fire of sanctions and counter-sanctions, to being rendered the subjects of nationalistic, anti-American bombast (itself a response to perceived American and Western aggression), to being confronted with new, mercurial regulations involving foreign capital, American businesses have had very little to gain from the spats between Beijing and Washington. The imperative is thus to seek ways of hedging against exigencies and contingencies arising from the vitriol – this could perhaps be achieved through diversifying portfolios, building more consolidated ties with the provincial and municipal governments, and deepening ties with prominent local and national businesses.
Businesses on both sides of the Pacific have a pivotal role to play at times like these – they must speak up against the weaponization and politicization of economic ties, and seek to articulate a vision in which both China and America alike have something vital to gain from the continued maintenance of cordial, amicable economic relations.
