China and the US are enjoying a key position in a brand new period of globalization – world
US Trade Representative Katherine Tai said in a speech on Oct. 4 that instead of decoupling the United States and China, perhaps one could start thinking about “recoupling,” suggesting that the notion of decoupling is either over or on Loses meaning.
Former US President Donald Trump’s administration has imposed or threatened a series of measures that have been viewed by some as precursors to the economic, trade, and technological decoupling of the two countries. These measures included adding a number of Chinese technology companies such as Huawei, SenseTime and Hikvision to a “company list” and restricting their business with the US.
This was intended to prevent Chinese participation in the US communications network and to threaten the US activities of Chinese companies such as TikTok, WeChat and Xiaomi.
At the height of the COVID-19 outbreak in China in early 2020, many expected large numbers of foreign companies, especially U.S. companies, to leave China in droves. These people called this expected phenomenon “desinization”.
However, a media report said US-China bilateral trade reached $ 630 billion in 2020, up 16.4 percent from the previous year. In the first six months of 2021, it grew 45.7 percent year over year to $ 341 billion.
In a September poll by the Shanghai American Chamber of Commerce, 72 percent of 125 respondents with manufacturing operations in China said they had no plans to move production out of China in the next three years.
Separately, Samantha Vortherms, Assistant Professor of Political Science at the University of California, Irvine, and Jiakun Jack Zhang, Assistant Professor of East Asian Politics at the University of Kansas noted that the US-China trade war had not caused US companies to leave the Chinese market.
The record inflow of foreign direct investment into China in 2020 shows that companies in both countries remain closely intertwined. “The degree of decoupling, as measured by FDI, has been greater in the minds of politicians and experts than the reality of companies in China,” said the Shanghai American Chamber of Commerce in its annual China Business Report.
In addition, different industries have reacted very differently to the driving forces.
While the US has prevented Huawei from participating in building the 5G communications network in its home market, US tech companies can continue to work with Huawei to develop international 5G standards.
In the semiconductor industry, both mainland China and the US are looking to strengthen their own semiconductor value chains, with key players like Taiwan’s TSMC and South Korea’s Samsung building new manufacturing facilities outside of their home locations, with manufacturers seeking new strategies due to the rapidly changing global landscape.
Global automakers need to consider two systems – one China-centric and one US-centric – as the speed, intensity and sophistication of the smart infrastructure built by China and the US continue to differ.
However, globalization is likely to increase in industries such as agriculture and the food industry. China’s growing middle income group means increasing demand and need for nutritious foods. This need would have to be partially covered by sourcing from abroad.
While the last three decades of globalization have changed the world dramatically, the fundamental nature of globalization is changing in fundamental ways.
In the first era of globalization, the West was the main center of demand and China was the main source of supply for a wide range of products.
While this continued into the next phase of globalization, China’s rapidly growing middle income group and the pursuit of improving business skills make China a center of demand and supply.
Therefore, in line with the new economic policy, the paradigm of “dual circulation” is emerging, in which the domestic market is the mainstay and the domestic and foreign markets are mutually reinforcing. Regional trade agreements such as the Regional Comprehensive Economic Partnership will expand “inland traffic”.
While these are likely to be key issues in the future, there could also be some regionalization or localization of supply chains and perhaps some “re-shoring” of manufacturing to the US.
Will there be a decoupling between the US and China?
As long as US sanctions against some of the Chinese tech companies persist, some degree of decoupling will continue.
Data security is increasingly viewed as a national security issue. Hence, the US and China expect companies operating in their respective jurisdictions to adhere to their internal regulations, which creates a degree of decoupling.
In addition, the increasing divergence in the intensity and sophistication of the digital infrastructures in the two countries would mean that some companies would have to pursue different strategies.
However, the world is being driven into a new era of globalization in which both the US and China, the world’s two leading economies, play a vital role, working together in some cases and competing in others.
As humanity is looking for greater connectivity, decoupling would not fully match this trend. In many ways, there was never really any decoupling, so feedback is not required.
There has been a decoupling or partial decoupling in some specific cases, and as US Trade Representative Tai said, it may now be time to decouple again.
In the increasingly networked world, a simplified idea of decoupling makes little sense and will not exist. In the future, the US-China relationship will be much more complicated and demanding, and the win-win cooperation will be optimal.
The author is the founder and CEO of Gao Feng Advisory Co, a strategy and management consultancy. Views do not necessarily reflect those of China Daily.