This week’s summit in Washington between Hu Jintao and Barack Obama was carefully choreographed to put the emerging relationship between China and the US into a positive frame. With recent figures putting China’s GDP growth at 10.3% for 2010 and some commentators suggesting China could become the world’s biggest economy even as soon as the next decade, it is clear that the two biggest global economic powers are moving into a different phase of their relationship. Even as China is growing and assuming a greater role on the world stage, the US is starting to recognize that its own “glory days” as the world’s leading military, technology, education, and consumer power (to name just a few) are declining. Its status as international power broker has been damaged by wars in Iraq and Afghanistan, failure to lead on global issues such as climate change, and domestic economic challenges. So how do the two leaders collaborate to compete, when there are clearly trade, currency, technology, human rights and potentially military tensions on the agenda? Can they achieve a win-win rather than a win-lose relationship?
On the surface this looks tough. President Hu has meetings today with Congress and powerful US business leaders, many of whom are hostile over trade and currency tensions, accusing China of keeping the yuan artificially low to aid exports, hurting American businesses by under-cutting them at home and making US exports to China more expensive. Competition between the two countries appears to be well and truly alive in this area – even if Obama stresses the US$ 45 billion in new business deals, including a US$19 billion deal for 200 Boeing airplanes, that he says will help create 235,000 U.S. jobs. This is in addition to the half-million U.S. jobs already generated by the US annual exports to China which are estimated at US$100 billion. Add in the fact that China is moving up the food chain in terms of its technology skills – it’s no longer just a mass producer of plastic low-cost goods but an emerging high tech powerhouse with massive investments in future-focused technologies such as clean tech and capable of building its own stealth fighter. And it has the education system to deliver more where this came from: “With China’s debut in international standardized testing, students in Shanghai have surprised experts by outscoring their counterparts in dozens of other countries, in reading as well as in math and science,” according to the New York Times just over a week ago.
Having said this, it is very clear that neither the US nor China can survive without the other, whether in terms of markets or technology. Together they control one third of the planet’s economic output and vast amounts of trade and investment. With smart people in both nations, it cannot have escaped notice that competition – win-lose – has less to offer both than cooperation. There is too much at stake on both sides, once the posturing is over. Right now, we are dancing around the sidelines of how this may evolve in future, but it is clear this is the only option in the longer-term. What it will mean for other nations, including the rest of the developed and rapidly developing world, is another question. How will their competitive economic landscape change if the two “elephants in the room” start to dance?
So what about international diplomacy – keeping the global peace – can the US and China cooperate here? China’s role in keeping North Korea in check is critical and the US, along with the rest of the world, has a strong interest in ensuring North Korea does not become a rogue nuclear power. For the first time Hu expressed concerns about uranium enrichment – in line with the US, so here there is improved alignment. However, with an imminent power shift in China in 2012, how China will take forward its role as a global superpower may test the relationship between the two countries.
The outstanding question is whether cooperation is possible in terms of values and beliefs. The two countries are at very different stages of development, have radically different governance systems and take different perspectives on the definition human rights. The design of the meetings glossed over this aspect to an extent – Obama apparently did forcefully tackle the poor Chinese record on human rights and Hu publically acknowledged that China has “a lot” to do in this respect, although it seems this message did not get reported back home. Also consider that President Hu was received with all pomp and circumstance even as the latest Nobel Peace Prize winner, Liu Xiaobo, languished in a Chinese prison. Unfortunately these fundamental social views and beliefs could make it harder for the US and China to collaborate in an atmosphere of trust in the long-term – trust being a big focus of the summit. It will take a concerted effort between the two nations to overcome this barrier of understanding and potential division.
So as a business, should you be positive or negative on the summit? Hard to tell, as ever, with geopolitical relationships, since as we know from Wikileaks what is said in public is not always practiced in private. The bottom line is that these two nations will have a huge impact on the future and businesses need to understand the evolving relationship. Ask:
- What is the impact on my business if relationships between China and the US become more cooperative? And if they become less so?
- How do we reconcile different worldviews, beliefs and values within our organization, given that China is a critical growth market for many businesses?
- What are the capabilities and market positions that we need to build to succeed both in a world of cooperation and in world of increasing competition?