In a recent New Yorker magazine, an article appeared about the fractious and seemingly binary trading relationship between China and the USA.
In a recent New Yorker magazine, an article appeared about the fractious and seemingly binary trading relationship between China and the USA. It explained how despite the strongman posturing at the highest political levels, relatively small companies in China are meanwhile reporting booming business with America – and with Europe. The picture is much less us and them than it used to be. In economics the word du jour is ‘multi-polarity.’
So, we were interested in hearing the opinions of Professor Ngaire Woods from Oxford University, who is an expert on US-China relations. She points out that three issues underscore the discussion between both reluctant trading partners. These issues are not so much about the bilateralism between the two super-powers, but more about the need for international cooperation.
- Financing – The G20 has recently agreed to some financing of the IMF
- Climate stabilisation
Woods points out that cooperation with China shouldn’t be regarded as appeasement. As she points out: what is the alternative? Coercion? Marginalisation? If we push back, then who is ‘we’ in this multi-polar world where in many cases China represents the good guys, while the USA, especially under Trump, became the unpredictable bad guy? Case in point: the Paris Climate Accord.
In truth, many infrastructure projects around the world need Chinese investment. These projects include expansion of one of Europe’s busiest ports, Valencia Spain, not to mention the massive capital projects, funded by China in Africa and South East Asia. Likewise, she says, there is a need to give China a place at the table of trusted world organisations.
Woods' favoured recipe for dealing with China is a three-step affair.
- Co-operate with China first – build relationships
- Establish a dialogue with China about worries/concerns
- Begin conversations about divergent values with humility
Another speaker on the same subject was Marko Papic, Chief strategist at US-based Clocktower Group, a leading source of macro- economic investment strategies. Clocktower is bullish about doing business with China, but they, too, have stepped away from framing China trade as all about bilateral trade with America. Papic makes four salient points.
- It is no longer about bilateralism but about (here’s that word again), a multi-polar system. It is harder to control allies when trade deals are being done all over. One example: China and Europe.
- The way we relate to China has investment implications:
- China is relevant globally as an influencer on issues such as the environment, and as a market itself.
- There are new technologies to invest in such as those that manufacture the machines that make the microchips.
- Democratisation of China is unlikely but of interest is the role of Taiwan as a centre, given its burgeoning semi- conductor industry.
- Globalisation is breaking down. A multi-polar world is, in the big scheme of things, less favourable to open trade.