Print

Email story

Comment

Email editor

China's spreading shadow

By KRIS HUNDLEY
Published February 6, 2005

Ted Fishman, author of China, Inc.: How the Rise of the Next Superpower Challenges America and the World, originally pitched his editor a book on globalization. But his focus quickly honed in on China and how it is changing the world.

Fishman spoke recently with Times business writer Kris Hundley from his home in Chicago about his two extended trips to China, how he came to grips with his subject and why the Bush administration is unlikely to grapple with the China challenge.

What should the average American know about China?

The first thing is not to think our economy exists on its own. China affects us as workers and what jobs are going to exist here and how to keep those jobs. As a parent, I think about it a lot. There's no reason why our kids shouldn't be learning Chinese.

As a citizen, we have to realize that China is a very nationalistic, often ethnocentric country which feels like destiny is on its side. That's a very powerful force. Just as they often speak officially about a peaceful rise and a world in which everybody prospers, we have to think about what it means to be the architect of the world.

Right now, the architect is whoever the aggressor is. We have to figure out how to defuse all these really dangerous national emotions - and we're not innocent of them either. We have to learn to get along, because the result of a serious confrontation between the U.S. and China would be cataclysmic. We're codependent economically, and very soon we will be codependent geopolitically.

What one or two statistics about China convey the scope of the change occurring there? The Chinese population statistic may well be undercounted by the entire population of the United States. We say it is 1.3-billion, but a lot of really smart people say that's undercounted by 200- or 300-million people.

The other statistic that gets me is that the floating population in China - the migrants floating from town to town - is the size of the total labor force in the U.S. and Europe combined.

Despite U.S. officials' pressure on China to allow their currency to float, rather than remain tied to the U.S. dollar, won't American consumers pay higher prices for Chinese imports if that occurs?

You're right. There's a big political cost to that. Historically, the Chinese have been very good at finding ways to make things cheap enough to get around all the tariffs and currency changes, so an adjustment to the yuan may or may not be a problem. If it is 15 to 20 percent, we might not see much change. If it's 40 percent, prices of Chinese goods may go up, but it might be just the medicine we need.

Will China ever give more than lip service to cracking down on counterfeiting?

Only under intense pressure from the rest of the world. The U.S. can't do it alone. And you have French and German politicians constantly on planes to China, making the best deals with the Chinese so they can get in ahead of the U.S. companies. Those sweetheart deals undercut everybody's interests.

Explain how China's considerable investments in the United States underwrite and perpetuate American consumerism.

All our big deficit spending and trade deficit has to be financed. To finance that, we borrow from the rest of the world. China is making a huge surplus of dollars because of the surplus of trade with the U.S., and it's hard to figure out where to park all that money. But the Chinese know they want to put it somewhere safe, and the best place is the American bond market. They're buying billions of dollars' worth a month. It's a very volatile situation.

How can America respond?

We have to think seriously about where our economy is the strongest. And we're strongest at making the kinds of things the Chinese don't pay for: ideas that can be transferred by a click of the mouse. It's important to put all our national effort into making sure our knowledge economy is protected.

So why do U.S. corporations repeatedly sign contracts with China that essentially give this knowledge economy away for free?

It's the drug of growth corporations love. They figure even if they cede 60 to 70 percent of the market that rightfully should be theirs to Chinese competitors, they're getting the other 30 percent, even though the treasures of our economy are transferred in the works.

Are there any careers immune to outsourcing to China, short of flipping burgers?

Health care providers who provide direct, person-to-person service. But it's very hard to see almost any field in which the Chinese won't have some corner that challenges American companies to do better. Even in entertainment. The rest of the world isn't so committed to American films. And the Chinese know how to make really good movies.

Despite outsourcing being a hot political topic during election years, do you think there's any way to reverse the trend?

The bigger question is how we conceptualize the Chinese. Even though I raise all these danger flags, I think it's a big mistake to demonize the Chinese. It's better to have a grudging admiration because they're using their power any way they can. That's what we do. We just have to figure out our approach to it.

Do you have any sense the Bush administration is tackling the issue?

We have a big government problem. The Bush administration has more CEOs of big corporations than any administration, and in the business community there's a war among large companies versus middle- and small-size companies. The large companies want to go over to China by hook or by crook. And the small companies, who act as their suppliers, are feeling the pressure.

So as long as the administration is focused on the biggest corporations, its response to China will be the approach that best serves the biggest companies. But you have to remember that big companies don't have any special allegiance to the U.S. And a lot of corporate headquarters are moving to Shanghai.

China-watchers always warn about two potential crises: domestic instability and financial collapse. Do you think either of these is a threat to China's upward trajectory?

They are all possibilities. China in the near-term future is beyond human comprehension, because there are too many variables. So there can be dissatisfaction among a big swath of the farm population, displacement among the urban population, a banking system that's a disaster. Yet China's next-year growth numbers are always bigger than the year before.

Even if the banks collapse and there's lots of revolt, China is not going back to 50 years of Communist isolation. It's here and it's going to be here, and it's a very strong factor in our lives and whether we do well or do poorly in the near term.

So are your children learning Chinese?

I have a 16-year-old daughter and 13-year-old son, and their school doesn't offer Chinese. They'd have to fire the German teacher.

[Last modified February 6, 2005, 00:22:15]