文：David J. Lynch
As Trump fights with China over trade,U.S.-China economic relationship already being redefined
Chinese consumers for the first time last year bought more Cadillacs than Americans did, helping drive profits at General Motors. And though the designs for those Cadillacs may have been drafted in Detroit, nearly all of the luxury automobiles were assembled in China by some of GM’s nearly 60,000 local workers.
This growing dynamic — of American companies serving Chinese consumers with products made in China — marks a shift in global trade that could pose a significant challenge to President Trump’s“America First” agenda.
Trump has based his campaign to refashion economic relations with China on the well-established notion that the country undercut American workers through low-wage manufacturing of goods exported tothe United States.
That campaign entered a new chapter thisweek when Trump once again hiked tariffs on Chinese goods after declaring himself dissatisfied with the pace of negotiations on a new trade agreement.
But whether he succeeds in securing a trade deal, many economists and executives say, the nature of the business relationship between the United States and China already is being redefined.
After four decades of economic reform, China is morphing from a low-wage exporter into the largest consumer market fora growing number of industries, including automobiles, video games and computers.
“We’re at the end of a period of the globalization of production,”said William Overholt, a senior fellow at Harvard University’s Asia Center.“We’re at the beginning of a period of globalization of consumption in which the center of gravity moves from baby boomers in the west to the relatively young Chinese.”
A decade ago, for instance, Chinese consumers bought 71 percent of the products manufactured in China, according to the McKinsey Global Institute. Today, the Chinese buy 85 percent of what they produce — and their economy is three times larger.
By next year, China’s per-person income will have doubled since 2010, according to the Organization for Economic Cooperation and Development.
The phenomenon, which is also seen in other quickly developing countries like India and Indonesia, will create a new set of winners and losers.
In the United States, the principal beneficiaries of the era of globalized consumption are likely to be investors and highly skilled employees, rather than the blue-collar workers who suffered as companies moved overseas.
“It’s definitely a profits story,” said Dean Baker, senior economist at the Center for Economic and Policy Research. “It’ll have very little to do with any jobs here.”
In the past, Americans bought up the low-cost goods made in China, which was a boon for Chinese workers and also for cost-conscious Americans. But, in seeking to cater to the Chinese consumer, the reverse is not true. American companies instead are setting up factories there and in other developing markets.
Already, United States -based multinationals have been creating jobs faster in China than at home, according to the Bureau of Economic Analysis. Since 2009, corporations have increased their Chinese workforce by 86 percent to 1.7 million — roughly four times the rate of increase at home.
For Trump, that means a trade policy that often seems to promise a return to an earlier era before globalization could disappoint, even if he secures a good deal with the Chinese.
Administration officials say they are making headway rebalancing trade relations with China and other countries to rectify mistakes made by Trump’s predecessors. A new North American trade deal, for example, requires more auto manufacturing to be done in the United States. (It still needs to be passed by Congress.) The president’s tariffs are credited with reviving steel production, one factor in the addition of 452,000 new manufacturing jobs during his tenure.
Other trends also could benefit the United States. Rising wages in countries such as China and increasing automation are making labor costs relatively less important in determining the location of new factories. That makes the U.S. more attractive as an investment destination, though rising automation means new plants require fewer American workers than the factories that closed earlier this century, vaporizing 6 million jobs.
In trade talks with Beijing, the administration also is seeking greater access to the Chinese market, which could aid U.S. export prospects. But the biggest new opportunities may do little for blue-collar workers who lost out over the past 20 years of growing U.S.-China trade ties.
U.S. negotiators are pushing the Chinese to open their markets for industries such as financial services, insurance and cloud computing. These are profitable endeavors, but ones that favor the well-educated and skilled.
The president has often portrayed a narrative of global commerce that puts the United States — not foreign markets— at the center. He calls it a “privilege” for other countries to sell into the U.S. market. And his decision to quit a 12-nation Pacific trade deal, known as the Trans-Pacific Partnership, on his fourth day in office left American companies at a disadvantage in key Asian markets at a time when developing countries are driving the growth in global demand.
Now, many executives say they do not expect the United States to reclaim its role as the globe’s dominant market.
Craig Allen, president of the U.S.-China Business Council, which represents companies such as Amazon, Goldman Sachs and Procter & Gamble, said the administration’s stance presents multinationals with a dilemma.
“A company told me today they feel some tension between what their shareholders are telling them and what the Trump administration is telling them,” said Allen, a former U.S. diplomat. “The administration is suggesting or emphasizing investment in the U.S. That’s not where the market is; that’s not where the market growth is.”
To be sure, despite consumption’s blossoming role in China’s growth, the country remains one of the world’s top exporters and enjoys a sizable merchandise trade surplus. Brad Setser, a former White House economist in the Obama administration, said talk of a new era is premature.
“This is one possible future evolution of the global economy. It isn’t necessarily the trajectory we’re already on,” he said.
The Chinese economy also has slowed from its double-digit growth pace of earlier this decade, and many business executives doubt President Xi Jinping’s commitment to further market-oriented reforms. China faces a daunting corporate debt burden that some economists warn could spark a financial crisis and delay the onset of a new economic era.
The typical Chinese individual also still earns much less than an American. In terms of purchasing power parity, which takes account of each country’s living costs, Chinese per-capita income is about $16,000, compared with roughly $60,000 in the United States.
Still, China has firmly established itself as a top opportunity — if not the top opportunity — for a wide range ofAmerican companies, including Apple, Walmart and Caterpillar. Over the past decade, per-person income in China has grown by 120 percent, compared with just 15 percent in the United States , according to Andy Rothman, an investment strategist with Matthews Asia in San Francisco.
“This is the world’s best consumer story,” Rothman said.
China’s growing prosperity is part of a broader transformation of developing countries that is affecting the volume of goods traded across borders, the design of industry supply chains and the mix between factory labor and robots.
By 2030, fast-growing developing countries led by China are expected to account for 51 percent of global consumption, nearly double their 2007 share, according to a study by McKinsey Global Institute.
Companies in the advanced economies, including the United States , the European Union and Japan, last year sold $4.5 trillion worth of goods, including machinery, chemicals and cars, to customersin poorer nations.
“This is exactly the wrong time to be putting up barriers to trade,”said Susan Lund, a McKinsey partner who directed the study.
In recent years, China accounted for more than one-third of global economic growth — roughly equal to the combined contributions of the United States, Europe and Japan, according to the International Monetary Fund.
For General Motors, that translated into deliveries of 3.65 million vehicles last year to Chinese buyers, compared with fewer than 3 million to Americans. The automaker earned $2 billion last year from its joint ventures in China.
“We posted the highest global sales mark in Cadillac’s 116-year history of 382,184 units, primarily on the strength of our performance inChina,” Steve Carlisle, senior vice president of General Motors, told an investor conference last month.
U.S. multinationals that prosper overseas typically add jobs back home at their headquarters, research labs and design studios. Successful ventures like Cadillac’s generate profits that flow to the corporate bottom line, generating job-creating innovations for Americans.
But those gains tilt toward investors and better-educated workers.
“The benefit of Chinese consumers buying more Cadillacs accrue more to shareholders and very high-skilled people. You’ll see more of an unbalanced distribution of benefits,” said Sergi Lanau, deputy chief economist for the Institute of International Finance.