Decoupling from China can’t fix US
Manufacturing, a weak spot in the US economy, could become a tailwind if the US sincerely takes a market economy approach to Chinese investment that’s keen on capitalizing on the US manufacturing revival.
Chinese sovereign wealth fund China Investment Corp (CIC) and US financial giant Goldman Sachs have begun investing in US manufacturing through a multibillion-dollar fund the two created roughly two years ago, the fund’s first investment, a Wall Street Journal article revealed on Friday.
The investment, yet to be publicly announced by either side, apparently offers a path to rekindle the US manufacturing sector.
As the WSJ article put it, “the fund can serve as a stable source of long-term capital for US projects,” citing CIC executives.
The investment exemplifies market-based efforts to fund manufacturing and infrastructure projects in the US that in some cases only build castles in the air, factoring in discrepancies among the three branches of the US government and between federal and state governments.
In another compelling sign,
American Factory, a documentary produced by former US president Barack Obama and his wife Michelle Obama for Netflix, debuted in late August and has drawn immense attention to a factory in the rust belt state of Ohio that had closed. The factory has been resurrected thanks to an investment by Cao Dewang, founder of China’s largest vehicle glassmaker Fuyao Group. Cao’s investment created more than 2,000 jobs in Ohio in 2014.
For the US government, which is finding it difficult to achieve a manufacturing revival, Chinese investment is out there like a beacon of hope.
There are growing signs that US President Donald Trump’s pledge to “Make America Great Again,” banking on bringing back manufacturing jobs to the US, isn’t being met. US manufacturing has turned south, according to another WSJ article on September 5. The article cited two major surveys of manufacturing purchasing managers in the US – one showed a negative outlook and the other by a whisker turning negative for the first time since 2009.
This obviously points to the failure of the Trump administration’s populism-obsessed mind-set that has resulted in the US missing out on opportunities to revive its manufacturing.
That the CIC-Goldman fund purportedly only made its first investment recently, roughly two years after its creation, actually shows how the US has sacrificed its manufacturing over the past two years or so, when a self-damaging trade war with China put its manufacturing revival on the back burner.
Increasingly it is the case that the US, rather than China, is facing the grave challenge posed by the trade tensions. It is still not too late if Washington can awaken from its populist illusions and realize that China and the US need each other.
The US economy, its manufacturing sector in particular, can’t prosper without the support of China. Likewise, China also needs to learn from US experience in aligning with the global economy. Neither side’s interests will be served in case of a decoupling that is wrongly interpreted as a cure for the US economy.