June 11. 2012 9:00AM

China and America need each other

Dispatches from China

By Einar Tangen

  
On May 15, China announced a 100-day “crackdown” against foreigners who have entered the country illegally, overstayed their visas or who are working without a work permit.

The announcement comes at a time of increasing tensions between the United States and China against the backdrop of increasing world political and economic instability.

For many foreigners living and working in China, rather than viewing the crackdown on illegals as a welcome move to get rid of a number of undesirables, they view the need to carry identification as threatening.

This has as much to do with international events as the Chinese government's announcements. On one side, China's increased military spending, more aggressive stance on disputed territories and growing economic power seems to be part a more nationalistic trend.

On the other, our "Pivot on Asia," stationing U.S. troops in Australia, joint military exercises and arms sales and economic uncertainty seem to be aimed at checking China.

In between are smaller countries who are playing Washington and Beijing against each other for their own ends, this includes, among others, Taiwan, Australia, Mongolia, Vietnam and the Philippines. It will not be the first nor the last time smaller countries, fearing a larger rising power nearby, resort to political posturing. Pitting more powerful countries against each other keeps them preoccupied and can be a useful means of attracting aid and other benefits. It can also be a useful ruse to deflect attention from domestic issues.

It would be unfortunate if these schoolyard antics were successful in derailing a relationship which the United States, China and the world desperately need at this time of economic and political instability.

Yes, there are differences in cultures and professed ideologies. And there will be fierce competition for natural resources as time goes on. But at a time when the world needs a calm hand, we need the relationship to work.

For the United States and Wisconsin, the loss of exports to China would be devastating. For those who think that manufacturing jobs would magically return to the United Sates as some sort of equalizer, they may want to consider that the global supply chain will continue to source low-cost production, and that is not the United States. India, other Southeast Asian countries and South America would probably benefit to some extent, but the impact of such an event would certainly spin the world into an even deeper economic abyss.

It is important to remember that it was our companies who moved production to China, India and the other lower-cost areas outside of the United States, in order to stay competitive and increase the bottom line. China certainly welcomed new investment, although some learned the hard way that a smile, a little English and a few drinks do not a good partner make. But they did not come in the middle of the night and steal U.S. jobs.

On the personal side, for a long time we expats enjoyed exalted status. We received special tax breaks, personally and for our companies, not available to Chinese individuals companies. We were welcomed and made to feel special at banquets and state events. People would offer us their seats on the subway, strangers would stop and thank us for helping their country. Leaders of cities and provinces, whose responsibilities put them often out of reach of their own people, were accessible to foreigners, especially from the United States and Europe.

But things started to change after 2007, with an increase in economic refugees who flocked to China on tourist visas and then stayed on as cash employees. A good portion of this new crowd brought few, if any, skills, other than their command of their native language, and in essence displaced Chinese workers. Some of them are less-than-ideal guests, a facet of life here in Beijing and the other larger cities which can be viewed nightly at the local "hot spots."

It is hardly surprising then that the Chinese government wants to rid itself of these parasites.

Unfortunately, their actions come at a time when they are considered in conjunction with other events. The financial crisis put a dent in our halo of superiority, and China's growing economic and political world presence has stoked nationalist feelings.

The attempted rape of a Chinese girl on one of the main streets of Beijing by a drunken British businessman and a Russian musician, who played for the Beijing Symphony, who thought it apropos to put his feet up on the back of a Chinese woman's train seat, was caught on camera and then publicized. It struck a raw nerve.

The incident involving the blind activist did not help, as many here question his motives and actions. Add this to the international situation, the constant China bashing which comes with U.S. presidential politics these days and the ongoing trade disputes, and it is hardly surprising that the Chinese feel uncomfortable.

On our side, the normalization of our economic and social status, we now have to pay the same taxes and obey the same laws as the Chinese. That, has put many expats on the defensive.

Journalists especially are finding their jobs more difficult because from their side they have a fundamental right to find and express what they deem news, while the Chinese government regards them increasingly as ungrateful and often disruptive guests.

Ironically, at a time when China is facing the same outflow of low-margin business like textiles, shoes and manufacturing that we experienced 30 years ago, and as the playing field is just starting to even out and turn in our favor, we face the prospect of losing the benefits of what was for a long time, a lopsided balance of trade issue.

China's growing middle class and increasing discretionary income is putting U.S. products within reach of more and more Chinese consumers. Our exports are rising, the RMB is rising and the growth of China's trade surplus is slowing.

China's large markets are too valuable to us to throw away on the fears and political machinations of politicians, whether here in the United States or elsewhere. This is not a situation where massed troops and tanks are menacing us or our allied countries. There is no basis to believe China is intent on invading neighboring countries or the United States.

Yes, they are very sticky about territorial issues, as are we. But, it is doubtful that any of the countries involved want to be involved in a full-scale military confrontation with China. The military and economic consequences would be almost unthinkable and would have no end game.

So what does this have to do with doing business in China? Everything and nothing. Everything, in the sense that these trends could hurt us and help our European competitors as we do business in China. Nothing, in the sense that if you come to China to do business and work, you will notice little, if anything.

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