Expert Assesses U.S.-China Business Prospects After Spy Plane Standoff
While the recent standoff between the United States and China over the landing of a U.S. surveillance plane on Hainan Island ended, questions remain over how the incident has damaged relations between the two countries. The greatest concern is over trade relations, since the countries have recently increased business interactions.
But according to Dr. William Ward, the Warehime Professor of Business Administration at Susquehanna University in Selinsgrove, Pa., most of that concern should rest with the Chinese.
"The Chinese need us a lot worse than we (the United States) need them," says Ward, whose primary academic research involves business in China. He also witnessed The Tianamen Square tragedy while he was in Beijing as a visiting scholar at the Peoples University of Beijing. He's been back to China since the violence, and continues to be invited as a guest scholar.
"What they (the Chinese) need is our markets for their goods. Anything they produce that is labor intensive - like clothing and textiles - they need to sell those things to us. That's what everyone talks about over there. They need us in a lot worse way and in much deeper ways than we need them."
Ward reports that the Chinese desperately need money and foreign direct investment, and that means they need joint ventures with American companies in order to retain earnings and keep those earnings for reinvestments.
"They (the Chinese) could get money from Europe and Japan, but their legacy in that is not good. They don't particularly like the Japanese, and they're afraid of European imperialism," says Ward. "So, they like the U.S. because of the money it has to invest."
Ward believes the second reason the Chinese need to continue good business relations with the U.S. is technology.
"We can really describe China as 'a vacuum' to technology in a 'microchip' world. They clearly need industrial technology," he says. "They need access to robotics, computer technology, and all kinds of things. They can't even bottle water or make hot dogs. They need industrial or manufacturing technology. Anything which we have taken for granted over the last 25 years is totally foreign to them."
Aside from access to technology, Ward says the Chinese also need to know how to use it - and that is yet another reason they need the U.S.
"China is a society that the industrial revolution bipassed in 19th century. They wanted it that way and they got it. The Communists tried to couple industrial technology with an agrarian society and under Mao, it turned out to be a miserable failure," says Ward. "They need technology, manufacturing and business knowledge. True, they have a basis in entrepreneurial dealings with culture and business in the past. But they don't have a large-scale international business history as a basis to compete in a modern industrial world."
"Where better than the U.S. is it possible to get those three things? The answer is nowhere. They (The Chinese) can get it at some other places, but not like they can in the U.S."
At the same time, Ward reports that the only thing United States businesses really need from China is cheap labor manufacturing.
"The Chinese have a huge population where they can produce cheap labor in certain situations. They have that, plus the potential market to buy our finished goods. But that market is particularly limited by Chinese disposable income, which is very low," says Ward. "How long will it take for them to get a high enough level of income to buy a lot of goods from us? In a society where there's one phone for 300 people, it's going to take a long time and there's always going to be a question of whether they can afford our goods.
Because the United States doesn't stand to gain as much from its growing business exchange with China, Ward believes "our strategic policy interests are more important than our business interests. For the Chinese, their business interests are much more important than their strategic interests in the U.S."
"The U.S. was willing to negotiate with China on the E-P3 only to avoid a loss of their positioning within that part of Asia. By default, the Chinese are a power there. But against the U.S., they (the Chinese) realize how weak they really are," says Ward. "So, it's embarrassing to them (the Chinese) to be an aspiring world power and be functionally weak against the world's only superpower. That's where this 'loss of face' stuff comes in. They (the Chinese) had to pick at all the little things to create the illusion that they're a powerful player in world."
Ward believes the United States' consistent policy towards China will "stay the course."
"They (U.S. officials) won't sacrifice strategic interests for business interests, where China is likely to sacrifice strategic interests for business interests. We have a lot of options that they don't have," he says. "I think the upcoming most-favored nation trade vote is critical to them (the Chinese) in that U.S. lawmakers could revoke that and put them through the torture test of this administration. The U.S. has them on most-favored nation, Taiwan, the Olympics, not to mention all the other leverages. Suppose the U.S. cut off all exports to China, they would have to settle for third-rate crap from the Russians."
Because the United States appears to have the bulk of the leverage, Ward believes the Chinese are really uncomfortable about that. He sees the recent standoff involving the surveillance plane as an effort by China "to show the U.S. they can be tough."
"I don't anticipate much of a change in our relationship with China over this. Time's on our side, not theirs. As Chinese paychecks eventually do grow over time, political freedoms and liberalism will also grow. As that happens, the country's political foundation will become more unstable," he says.
If you're interested in contacting Ward, his office phone number is (570) 372-4463, while his home number is (570) 374-8314. His e-mail is [email protected]. He enjoys working with the media and is always good about returning phone calls.
Feel free to call me at (814) 867-1963 if you have additional questions and or needs. Dick Jones Communications assists Susquehanna with its public affairs work.
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