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With Obama visiting China, thinking about overcoming U.S. economic challenges

 

My wife and I have been talking a lot about President Obama’s visit to China – and his meetings in Shanghai and with Chinese leader Hu Jintao in Beijing.

I mean: Who hasn’t?

The recession that gripped the United States for four consecutive quarters is likely over. But scores of people are still feeling the impact of unemployment.

Employment is expected to trail behind and the Federal Reserve is talking about more austere times in the months to come.

On paper, China’s economy remains impressive – there’s growth. Yes, the Chinese government launched its own stimulus spending package to avert a contraction. But it looks like the world’s third-largest economy has avoided major problems.

Leaders there know that domestic consumption and development are other legs on which to stand, besides competing in the global export market.

Talk to anyone who has been there recently and you’ll hear one word, specifically about major Chinese cities and economic change: Hot.

Or at least hotter, especially in mood, than some large U.S. cities.

Throw into this mix, at least for my family, that my wife is from Northern China. I’m from Northern California. My grandparents called China home.

I’m glad to see that U.S. journalists have been filing stories about the trip, including his meeting with Hu, and its meaning for the United States and China. Keep in mind that some believe that China might actually become the world’s second-largest economy as early as next year.

I was remarking to my wife about how much has changed in U.S.-China relations since 2006, when Hu visited the Seattle area and Washington, D.C.

Back then, at least from a regional perspective as a Seattle journalist, the talk was how Boeing viewed China’s commercial aircraft market as holding great potential. Intellectual property rights were on the minds of many tech leaders in the Seattle area, especially since Microsoft calls it home.

Hu, who toured Microsoft and Boeing, was the guest of honor at a banquet held at Bill Gates’ house in Medina.

Chinese leaders realized trade tensions existed in the United States. Right before Hu’s arrival, they went on a bit of spending spree in the United States, likely knowing that international sales can spread short-term goodwill. That included buying $5 billion worth of Boeing 737s.

Yes, the huge trade deficit between the two countries, concerns about the value of both currencies and market presence in China remain as Obama sets foot in Beijing and on the Great Wall.

But the housing bust, the deficit and economic contraction have changed the tenor of the U.S.-China conversation. 

The money issue – that China holds a huge amount of U.S. debt – has tilted the balance in a  sense.

So much so, that as I read, that Chinese government leaders have questioned how a U.S. healthcare overhaul would affect the deficit in the United States.

They are likely feeling bolder, seeing themselves as more equal as compared to China’s place in the world in the early 1990s.

In an article, Time’s Bill Powell ticks off five things the United States can learn from China. His list rightly includes saving money (though spending on hiring, research and development are always key in an economy) and taking smart risks.

Writing such an article is interesting, even if it can be a sensitive topic among some in the United States.

When President Clinton visited China, I recall that Time looked at 50 places that are important to China’s history that he would never see. The question of actually learning lessons from modern China really never entered conversations in the West.

But Powell leaves off three things that can cause a high degree of pressure and that anyone in China knows about: Making the right connections, or guanxi, getting along with the truly powerful and ensuring a profit to please the home office.

Again, the tone of the current talks is something to watch. 

It used to be, at least from a U.S. perspective: Let us tell you about things we value – both in direct or nuanced terms – and we hope that they leave a strong enough impression for you to follow suit.

Now, with China holding so much of the U.S. debt, Obama, as observers have noted, will likely be much more diplomatic because the relationship has grown so deep financially that no one in the White House wants to see it spiral down.

That also blunts, to an extent, any high ground the United States once had in talking to other countries, let alone China. 

I remember the days from the mid- to late-1990s when Chinese leaders would talk about learning from other countries, especially with technology and ways to do business. 

Now, as just one example, people in the United States might have to get used to Chinese executives coming to the United States and raising questions about operations, finances and the economy.

Will money from the emerging Chinese elite be invested in the United States? In real estate? Businesses?

With people in the United States ready to leave the recession behind and see employment and salaries increase, will we embrace this investment – should it arrive – or will we walk away? 

John Pomfret, a veteran China watcher, chronicles the U.S.-China relationship as it has unfolded in Wisconsin.

The current context reminds me of the two Chinese parables that I used in my article in 2006 to introduce Hu’s visit to the Seattle area:

Two men encounter a pair of tigers fighting over meat. One man wants to kill the animals. The other urges patience, saying: ‘When two tigers fight, one must get hurt.’

The other parable:

An old man wants to move a mountain that blocks the view from his house. Neighbors call him foolish. He says not to worry. If he fails, his son will prevail. If his son dies, he says, his son’s son will pick up the tools to finish the job.

It’s safe to say that Chinese want similar goals that we in the United States and others around the world want: A better life, a stronger nation (which includes military power), well-paying jobs and educational opportunities.

For years, as we’ve seen as recently as the 1970s and 1980s in China, those life goals could not be obtained. Now, they have been reached or are within the scope of millions.

Chinese leaders have pursued a market economy to accomplish their goals. And they have done it in their own way and in a relatively short period of time.

As I noted in my 2006 article, Chinese newspapers for a period used

the word “jueqi” to describe the country’s growth. That means to rise abruptly, like a mountain bursting from the earth.

Later, though, Chinese newspapers used the words “heping fazhan” to explain a peaceful, steady economic rise.

In a way, the economic model that Chinese leaders are using can be challenging to people in the United States who are accustomed to others in the world following the most powerful country on the planet and the free market system that it has embraced.

The complicating factor is that scale in China - both on human terms and economically – can eclipse other people and places quickly.

In the past, China has experienced the downsides of having a large population and an economy that wasn’t as robust as it is now.

Now, the advantages are that China can operate in both the low- and high-ends of the global economy – at the same time. By that, I mean low-cost production is still an option, even though the recession has cut clothing and other exports.

But Chinese companies can also pursue online shopping operations for its domestic market, as well as overseas investments such as wind power and the search for natural resources.

Also, keep in mind that China is the world’s largest market for automobiles.

Even before Obama landed in China, I’ve been thinking about the United States’ place in global history and economics.

As a resident of the U.S. West Coast, I still believe this country has some of the brightest, most talented, strategic and creative people.

The Seattle area is home to Microsoft as well as a host of other technology and computer companies. I also grew up in Silicon Valley and watched companies truly revolutionize the world.

But it was the Great Recession which has deflated our national mood – or at least made us uncertain about the future.

Uncertainty, as we all know, has never bode well for any economy.

What can the country and people do to regain the entrepreneurial mojo?

For one thing, locate capital. Find dollars. Make key, rational investments. Know what return you want. Manage risk. But take them.

Expand productivity, research and design as best we can.

Yes, it’s easy to say all of these things. But they’re important to say.

Differentiate your thoughts and product. Know what is coming.

As a business journalist, I saw companies in Seattle and the country sprint to return to do what they do best following the post-2001 recession.

They pursued opportunities, created jobs, sold products and services and excelled in research and development.

I realize the housing market created an unsustainable and frenzied force.

And the housing bust and Wall Street meltdown left U.S. banks and ordinary people cautious about losing money. People also are weary of spending, even though circulation is needed so others can cover costs, earn profits and pay employees good wages.

Getting over that hump is the challenge for the United States.

Either China actually avoided this hump during this recent global slowdown or its leaders have kept people’s eyes on an economic prize such that things hummed comparatively better than the United States.

My wife points out that there is another Chinese saying that talks about the consistency of many streams making up one river.

The meaning is that even pursuing one stream, even if it’s small, is part of a greater sum.

The amount of water in that stream might not be as much as a river. But at least, that stream is flowing.

I’m still confident that the United States will emerge from this recession with new ideas, energy and products and services.

People in the United States have bounced back before.

But in the next five years or so, we shouldn’t be surprised if Chinese companies have enhanced power and influence in this country and around the world.

Afterall, a Chinese company recently bought Hummer. IBM sold its personal computer division to China-based Lenovo.

My wife also tossed out another Chinese saying, which I’m certain the truly elite in any country will recognize: 

If you have money, even a ghost will work for you.