China could help make America great again
Instead of opponents, the two nations could be partners assisting the Trump administration in achieving its stated aims
On Jan 20, Donald Trump took the oath of office and was sworn in as the 45th president of the United States, but his aggressive remarks on economics, trade and geopolitics add more uncertainty — even potential tension — to Sino-US relations. In fact, the two countries are major trading partners and according the research Report on Chinese Enterprises Globalization — published by the Center for China and Globalization, China has become a net capital exporter for the first time.
In 2015, China’s total direct investment to the US exceeded the FDI amount from the US to China for the first time. Also, ChinaUS bilateral investment has experienced a rapid increase in the past few decades. This astonishing development has resulted in an immense spillover effect for both countries, promoting domestic employment, upgrading technological development and stimulating industrial restructuring. Thus, the two countries should prioritize economic diplomacy and seek more opportunities for collaboration.
To make America great again, Trump has promised to bring manufacturing companies back to US, and increase infrastructure investment to create more jobs for unemployed Americans. In this case, China is probably the best partner America can have to help it achieve its ambitions.
It is believed that during Trump’s administration, policy initiatives will be heavily deployed to revitalize American manufacturing and bring jobs back to the country. Whether Trump will be successful in his attempt to encourage more manufacturing companies to move operations to the US depends not only on re-shoring but also on Chinese manufacturers.
These manufacturers might be a solution to Trump’s Rust Belt jobs problem. CCG’s research shows that, while sectors for China’s outbound investment are quite diversified, manufacturing comes out first. And, most importantly, private enterprises have become the main force for outbound investment. More private enterprises have gone up to the high-end of global value chain.
Last year, I was invited as a guest to attend Fuyao Glass America’s opening ceremony for its newest US facility in Moraine, Ohio. This investment accounts for $450 million, which represents the largest Chinese investment in Ohio and the eighth largest direct foreign investment in the US in the past decade. Currently, this factory employs about 2,000 people and expects to recruit 300-500 people more by the end of 2017. As is planned, this investment will be enlarged to $1 billion and create 5,000 jobs for local people.
Fuyao Glass is not the only enterprise that is committed to investing in the US. Cross-border mergers and acquisitions are a growing trend and have become the main focus of Chinese companies’ outbound investment. Resources, technology, brands and market channels are the main motivations for cross-border M&A.
In January 2016, Chinese home appliance maker Haier Group made a deal to buy General Electric Co’s appliance business for $5.4 billion. This month, Jack Ma, Alibaba executive chairman, met Trump and laid out the Chinese e-commerce giant’s new plan that could create 1 million jobs for small US businesses over the next five years.
Another way for Trump to create more jobs is through an infrastructure revamp. This is a chance for China to play a role, since it has a great deal of experience in infrastructure construction.
China can also invite the US to join the Asian Infrastructure Investment Bank. China can work with the US to foster a stronger and wider collaboration in infrastructure construction, involving the US, including by jointly exploring markets in other countries.
The Chinese government recently announced a series of reforms to improve the overall investment climate, including both market access and regulation, which inevitably compete with Trump’s initiatives for attracting investment.
The two countries still have a great potential for collaboration, and China seems the best choice as a partner to help the US become a great power again.