The China that Trump’s administration thinks it is dealing with is decades old. It is the old China that has cheap labor, requires our technology and ideas, and depends entirely on exports. In the military sense, it is seen as expansionistic.
This might have been the old China. It is not today’s China.
Today’s China has advanced technology. In areas, such as A-I (artificial intelligence), it is more advanced than the West.
According to the World Intellectual Property Organization, China’s patent applications and patent grants have exceeded those of the U.S. It has exceeded Japan, Germany and South Korea for years.
The Federal Reserve Bank of St Louis claims that the quality of these patents is lower than the U.S., but even if this is correct- a point that is in question- “quality” and size indicates an upward trend. China’s exports in 2006 were 35 percent of its GNP. In 2017, it was 18.54 percent. Imports declined from 29 percent in 2006 to 19% percent in 2014.
Its top three exports are hydrocarbons, trucks & cars, and household appliances. This list often surprises non-observers.
The crossover point between manufacturing and services in China occurred in 2012 when services were 13 percent more than manufacturing in GNP.
While China is still defined as an emerging country, it really is developed with factories often more advanced than those in the West. Wealth has more than doubled and there is a sizeable middle class.
China has challenges in the environment, infrastructure and health, but the government is addressing these problems with significant investments.
The West sees China as a communist dictatorship, but does not realize that the country’s leaders wish to improve the welfare of its people. This was how the early Party under Mao won the support of the peasants. Cynics might say that the Party’s sole motivation is power, but the social element cannot be discounted. It was, in my opinion, the reason for the misguided Great Leap Forward.
So what is my point?
The economy of China is rich with opportunity, opportunity that U.S. and other Western countries have worked for and can now bear advantage. The shift to service from manufacturing is important as it offers significant opportunities for trade.
China is looking forward. The U.S. currently is looking backwards.
In many respects emerging economies have a huge advantage over ours. They can leapfrog over old technology. South Korea has Internet speed of 6.3 mbps. We have not obtained 5 mbps. Many emerging countries use satellite rather than land lines. In much of Africa and southeast Asia, banking is done on mobile phones.
Look at retailing in the US. Bon-Ton, Sears, Kmart, and Toys R Us have failed. Survivors have struggled given competition from Amazon and the Internet. China did not have the legacy of retail shopping centers and department stores so Alibaba and Ten Cent were able to grow an online business with great speed to include retail, banking and entertainment, to name a few of their services. Now these firms and others are beginning to build local stores. The technology these “emerging” companies have created are not burdened by the past.
You might have heard about China’s 2025 strategy. This plan is designed to get them on equal status with the West for technology. They have already pulled ahead in some areas.
One last, but important point. China is an inward looking country. When the country has had strong leadership as it does now, it reverts to its historical roots. It uses geography- water, deserts, mountains- and buffer staffs to protect itself. Most of the country’s minorities are on the edges of the country. The Great Wall is seen historically as a way to keep people in not to keep others out. China’s diplomatic efforts are designed to obtain raw materials and agricultural property to grow food. China is defensive and protective.
This perspective differs from the U.S. and Russia which are expansionistic.
The U.S. has been China’s biggest trading partner, with 18 percent of its exports. Hong Kong is second at 14 percent, followed by Japan and South Korea. But China can find other trading partners, and will as they compete more with the West.
The U.S. needs to revise its current policy towards China given the realities of the new China. It is in our best interests to do so.
Bob Chernow is a Milwaukee businessman. He studied geo-politics and China at the University of Leicester and as a Military Intelligence officer during the Vietnam War.
