Sino American Relations Since Ping-Pong Diplomacy

Published in 2016 annual issue of Diplomatist (India)

On April 6,1971, the 31^st World Table Tennis Championship took place in Nagoya, Japan. Today, not many would remember the outcome of the international competition but the world remembers an act of friendship that led to “the week that changed the world.”

When an American player missed his bus after practice and the Chinese players invited him to ride in theirs, the athletes became friends. When this encounter was reported back to Beijing, China’s leader Mao Zedong promptly invited the American team to tour China after Nagoya.

The White House interpreted Mao’s invitation as a clear signal that China was interested in re-establishing relations with the U.S. In response, President Richard Nixon sent Henry Kissinger to Beijing to secretly arrange for Nixon’s visit to China.

Nixon went to China in February of the following year and he wrote that his diplomatic breakthrough with China was the week that changed the world. The encounter that led to his visit became known as Ping-Pong diplomacy. History would remember the event as the beginning of a new bilateral relationship between China and the U.S.

Cynics in the West attributed the entire matter to calculated manipulation by Mao rather than innocent friendship between athletes. Then again, pundits in the West tend to see ulterior motives related to anything that China does.

In reality, officials from China and the U.S. had been maintaining low-level diplomatic contacts for sometime and both sides had reached the conclusion that resuming official diplomatic relations was of mutual interests.

President Nixon felt that it was not realistic to isolate a quarter of the world’s mankind indefinitely and Mao realized that Nixon wanted to get out of the Vietnam quagmire and could use China’s help. Both were interested in forming a united front in face of a common adversary, namely the Soviet Union.

Shanghai Communiqué

At the end of Nixon’s visit in China, the U.S. and the PRC jointly issued the Shanghai Communiqué. In the Communiqué, the U.S. acknowledged that there was only one China and that Taiwan was a part of China. This acknowledgement was absolutely essential to China in order for Nixon’s visit to be considered a success.

The Communiqué has indeed served the bilateral relations well. Every US president since Nixon has pledged to honor the terms contained in the joint agreement. Despite or perhaps because of the latitude for interpretation by the ambiguity in the document, Beijing has been sufficiently reassured by the American pledge.

To the Chinese, the American pledge means that the U.S. will not interfere in the evolving development of the cross-straits relations between Taiwan and the mainland. Washington would add to China’s understanding with “so long as the cross-straits relations proceed peacefully.”

Formal normalization

The next milestone in the U.S. China relations was the formal normalization between the two countries on January 1, 1979. One can see the greatest importance Beijing placed on this agreement for normalization when the People’s Daily splashed the news in the form of a proclamation, printed in a special one-page extra edition in bold red ink. The only previous occasion when such a special edition was published was to announce the detonation of China’s first atomic bomb (and much later when China put a man in space).

Mao died in 1976 and by 1979, Deng Xiao-ping had returned to power and he celebrated the normalization with a grand tour of the U.S. in mid January. Despite his diminutive physical stature, he was a media sensation. Photos of Deng wearing a ten-gallon cowboy hat charmed the American public. What followed after Deng’s visit was a decade long honeymoon in Sino American relations.

While Deng got the bilateral relations off on an up-beat note, he was busy leading the reform of China’s economic policy. Where the central planners used to set the production goals and allocate the resources, now state control was gradually loosened. China went through a transitional phase when it was called a market economy with socialist characteristics. Eventually China dropped any pretense and simply referred theirs as a market economy.

Deng begins reform

During this period, the world came to know Deng by a number of his favorite aphorisms. By “to get rich is glorious,” Deng was recognizing that as market dynamics were allowed to exert their influence on the economy, some individuals would become wealthy before others. He saw that it was inevitable and the country would be better off than when everybody remained equally poor under Mao.

“It doesn’t matter if it’s a white cat or black cat, so long as it catches mice, it is a good cat.” This expression was a salute to pragmatism as Deng decided to move away from total state control to policies that will encourage individual initiative and entrepreneurism.

“Crossing the river while groping for the stones,” reflected the experimental nature of the policy changes that Deng had embarked. Sometimes this meant one small cautious step at a time and measure the impact before taking another. Other times, policy changes were applied to a small region to fully understand the impact before introducing the change on a national scale.

These quotes reflected Deng’s move away from ideology and dogma toward a pragmatic approach that was to stimulate China’s economy and set China on the road of more than three decades of double-digit growth. Deng’s pragmatism meant allowing foreign direct investments to participate in China’s economy, i.e., opening some windows even if it meant letting in some (Western) flies.

Tiananmen resets the relations

The next major marker in the Sino-American relations was June 4, 1989. The previous nightfall and early dawn was when the People’s Liberation Army tanks rolled into Tiananmen Square and dispersed the student protesters gathered there. On the way to the square, some PLA soldiers were assaulted and some bystanders and protesters were shot and killed. To this day, official tally of the casualty is not known.

Ironically, Soviet leader Gorbachev made a state visit to Beijing that May with a large contingent of western media in tow. The media noticed a ragtag group of student protesters in Tiananmen that had been there since April.

The students had been protesting official corruption and unfair and arbitrary job assignment following their graduation. After interacting with the western media, the student protest was energized and turned into a full-blown protest, ostensibly in quest of democracy.

After Gorbachev returned to Moscow, the media stayed behind to follow the student protest that in part they had inadvertently rekindled. Thus in the confrontation that ensued, the western media had front row seats to witness the shootings, the bloodied civilians, the bodies on the street and the world famous image of the lone young man standing in front of a column of tanks.

The world was shocked by the images shown on their TV as transmitted live from Beijing. China was loudly condemned for gross violation of human rights. Some members of the U.S. Congress were particularly vehement and vociferous.

Gorbachev was a mere two years away from presiding the total implosion and disintegration of the Soviet Union. The USSR menace had been fading for some time and therefore so was the importance and relevance of the Sino American alliance to oppose the USSR. Tiananmen marked the end of the long Sino-American honeymoon.

Overseas Chinese invests in China

After the Tiananmen debacle, some of the western companies already in China hesitated or even retreated from China. Deng strived harder than ever to open up China with economic reform. His historic tour of Shenzhen in 1992 as one of the first Special Economic Zones launched the transformation of a sleepy fishing village into an eventual megapolis that was to become more Hong Kong than even Hong Kong.

A popular notion was that the developed countries with advanced economies and technologies came pouring into China in response to the open windows. In reality, for the first decade after Deng’s southern tour, the major influx of foreign direct investments did not come from the West.

The first chunk of FDI came over the border from Hong Kong Chinese industrialists. They were the first to move their manufacturing operations to Shenzhen and surrounding area to take advantage of the lower wages and to enjoy various incentives.

The Taiwan companies were the next wave to follow and move their operations into China. Their lines of businesses, such as electronics, were generally more sophisticated than the Hong Kong products. Both groups of investors enjoyed not only government incentives but also the ability to operate in an environment of a common language and culture.

Often overlooked and not given enough credit, these Hong Kong and Taiwan companies introduced good manufacturing practices into China and helped raise the quality and productivity of the workforce in China. Local Chinese operations were forced to discard the lackadaisical attitudes ingrained by years of state control (popularly known as iron rice bowl mentality) and raise their productivity in order to compete.

By the time western companies entered China in significant numbers to set up their manufacturing plants, the effectiveness of the Chinese workforce already had the benefit of a decade or more learning from the presence of Hong Kong and Taiwan companies.

Beginning of the age of terrorism

When bin Laden’s gang of terrorist attacked New York’s world trade center on September 11, 2001, a lot had already changed in the Sino-American relations.

The neoconservatives in the U.S. saw the collapse of Soviet Union as the opportunity to project American might and move toward world domination as the sole superpower standing. Others in need of a replacement adversary to continue to justify the massive allocation for the national defense budget began to look at China as the most likely candidate.

The idea of American hegemony and a strong military budget often goes hand in hand among policymakers in Washington. They were the same folks that believe a shock and awe blitzkrieg in Iraq would lead to quick celebration of American soldiers as liberators in Baghdad—a horrendous miscalculation that continues to exact a toll in human suffering today.

Thus consistent with a warmongering mentality, politicians from the left and right derived political profit by attacking a demonized China and accusing their opponent of not being tough on China. At every presidential election, aspiring candidates invariably attacked the incumbent for being soft on China.

Once the winning candidate moved into the White House, the newly elected president had to face the reality that the relationship with China was too important to be treated as a throwaway piece in the game of domestic politics.

By 9-11 2001, China’s economy, doubling every 7 years, had become too large to dismiss in the name of politics. Its economy fueled by low cost labor and being export driven complemented perfectly with the U.S. economy driven by conspicuous consumption that needed low cost imports from China.

Economists, not politicians, observed that the two economies were just like Siamese twins joined at the hip. Killing one would be fatal to the other. Some members of Congress, knowing full well that there is no downside to criticizing China, have taken full advantage to pummel China for political points from their constituents.

Thus as the world watched in horror the collapse of the twin towers in lower Manhattan, China’s president Jiang Zemin called George W. Bush at the White House to express his condolences and offer China’s solidarity with the U.S. in the fight against the radical jihadists. Surely, Jiang must have thought that now that the Americans have a real enemy, they can direct their vitriol away from China.

Indeed, in the name of war on terror, Americans marched into Iraq and Afghanistan and now have their hands full dealing with the mess that they created. It was beginning to look like falling into another Vietnam quagmire that will take a long time to extricate. It became more important to get along with China than not.

Financial crisis of 2008

Then came the world financial collapse of 2008. This crisis was caused by the funny money schemes such as credit default swaps and mortgage-backed securities created by the wizards of Wall Street. The crisis caught the world by surprise.

To keep the giant multinational banks that were too big to fail from failing, the U.S. government injected massive amounts of dollars to give the banks enough liquidity to keep their heads above water.

To protect China’s economy from being swamped by the global financial tsunami, Beijing invested heavily in domestic infrastructure projects, such as superhighways, bridges, high-speed rail, ports and airports.

At the end of the crisis, the U.S. government saved its economy and recovered the funds lent to the banks in distress. China got a breathtaking leap in infrastructure improvements that continue to fuel the growth of their economy.

Most damaging of all, the crisis shook Beijing’s faith and confidence in Washington and in the stability of the dollar. To reduce their holdings and exposure to the dollar, China has entered numerous currency swap agreements with many of its trading partners and by-pass having to settle trade transactions in dollars.

Barrack Obama was elected president in 2008 and inherited two hot potatoes. In his eight years, he managed to tame one of them, the financial demon that threatened to sink the U.S. economy and right the ship at home.

On the international front, he was far less successful. Not only did he not end the conflict of Afghanistan and Iraq as pledged in his campaign, Obama’s foreign policy had allowed and even encouraged Islamic terrorism to spread uncontrollably to Syria, Egypt and Libya.

Given the full plate, one would assume that the U.S. would seek to find accommodation with China’s rise, but the opposite has been true. The neocon hawks in Washington has been anticipating, almost gleefully, the inevitable Thucydides Trap between a rising power and the reigning power.

The Trap presaged the collision and conflict between China and the U.S. However, that a rising power and a reigning power must resort to killing each other is very much a western idea based on western experiences tracing back to the days of Athens vs. Sparta. It remains to be seen how far the U.S. can push China into a corner before China gets exasperated enough to become a western state and fight back.

China’s way forward

Partly motivated by not holding vast reserves of US dollars, China’s new leader, Xi Jinping, has been offering a different kind of international relations with his “one belt, one road” initiative along with the formation of the Asia Infrastructure Investment Bank. He is offering to apply China’s experience and expertise in infrastructure projects gained since 2008 to build along the maritime and land silk roads from China to Europe. These projects could be financed by AIIB along with other development banks.

Xi is not going around giving away foreign aid packages. The beneficiary countries would be co-participants and co-investors in the infrastructure projects.  The projects would have to be economically sound with reasonable prospect of payback. Xi believes infrastructure investments will improve the local economy. Eventually the improved economies would be integrated for the benefit of all the economies on the belt or road.

Many countries are already seeing the appeal of being part of Xi’s win-win collaboration. U.K. was the first to ignore Washington’s contrarian advice and rushed to become the first western power to be a founding member of AIIB. When Xi made his state visit to London in late 2015, the British government rolled out the red carpet to make sure that Xi got the message, namely, U.K. considers China’s friendship to be of their highest priority.

The newly elected president Rodrigo Duterte of Philippines seemed to agree with U.K.’s point of view. He has shunned the confrontation on the contested island in the South China Sea favored by his predecessor and signaled a willingness to talk the matter over with China. He too sees value in collaborating with China and being included in the maritime silk route.

Choices for India

For non-aligned nations such as India, there is a choice. On the one hand, India can seek the security that comes with being protected by the military might of Uncle Sam, subject, of course, to Uncle Sam’s whim on whether defending India continues to be in his national interest. Since the U.S. already spends beyond their means for the military, India would be expected to contribute their share of the burden.

America’s reassurance to India on the ties that bind would be based on the fact that both have a democratic form of government. The people of India should be in the excellent position to decide on their own as to how well democracies have worked for them in the past and can function in the future.

On the other hand, India can seek to become an economic partner with China and collaborate on infrastructure development. China will not seek to interfere with how India is governed nor insist on entering into military alliances. India would simply benefit from China’s experience in building and completing giant projects on time and under budget—something democracies are not good at.

Of course, developing relations with China and the U.S. are not mutually exclusive. Keeping friendly relations with both superpowers will simply require skillful diplomacy and bearing in mind that the expectations from the two will be very different.

Just June this year India along with Pakistan has signed the necessary memorandum to be admitted as member nations of Shanghai Cooperation Organization in 2017. SCO has been evolving since it was established 15 years ago with China and Russia as the prime movers. Other current members include Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan. With Iran expected to be the next member to be admitted, the SCO alliance will soon cover a huge part of Asia and nearly half of the world’s population.

The primary aim of SCO is to promote mutual cooperation in safe guarding the military and economic security of its members. Non-interference of the internal affairs of the member states is part of the charter. Obviously it is an alignment not designed to please Washington. (The American application to be an observer was rejected in 2005.)

In joining SCO, India shows that it already knows how to hedge its bet. Xi is betting that more countries will see economic cooperation to be more aligned to their national interest than military confrontation favored by the United States.

Is the Navarro appointment some kind of a joke?

This is piece originally appeared in Asia Times.

The Trump transition team recently announced the appointment of Peter Navarro to a newly created post as the head of newly created National Trade Council.

Apparently this appointment will not require a Senate hearing and confirmation. Thus a lightweight could be rewarded for his loyalty and not risk embarrassing the new administration.

On the other hand, Trump could be seriously considering Navarro as his point person in trade negotiations with China. Either way, the possible involvement of Navarro on the most important bilateral relations of the world deserves serious analysis.

At one time, Navarro tried his hand at politics and ran for U.S. Congress, mayor and city council. Each time he came up empty—a many times loser.

Then he became a lame pundit who concentrated his vitriol on China mixed with questionable reasoning in economics.

As one indicator, Gordon G. Chang wrote the forward to his more recent book on China’s militarism. Chang was the pundit who wrote the book that predicted the collapse of China in 2001, only to see China’s economy doubled and then doubled again.

Navarro came to Chang’s rescue by blaming the Clinton’s Administration for letting China into the WTO and thus supposedly prevented Chang’s forecast of doom from coming true.

Then Navarro expressed his unreserved admiration for Harry Wu because Wu was a willing talking head in Navarro’s video interviews. Of course, since his death Wu’s sordid past for lying, stealing other people’s money and cheating on his wife has come to light.

Until Trump’s appointment, that’s the kind of company Navarro keeps.

Apparently, he came to Trump’s attention when he said 4 to 5% GDP growth is possible under Trump’s administration even while imposing import duties on goods made in China. If that’s really so, the economic growth would have to be increasing at better than twice the historic rate associated with a good year.

The simple but erroneous idea is that import tariff will protect jobs in the domestic market. It simply doesn’t work that way and unbecoming for a Harvard PhD economist, like Navarro, to say so.

Ronald Reagan tried to protect America’s auto industry

A fairly recent example that comes to mind was when Reagan wanted to protect the American auto industry by imposing an import duty on cars made in Japan. The idea was to give the U.S. carmakers breathing space to become more competitive.

Instead of taking advantage of the import barrier to work on their competitiveness, the U.S. car companies simply took advantage of the new prices for imported Japanese cars by raising their own sticker price. It was only after the Japanese makers transferred their plants into the U.S.—and thus avoided the import duty—that the American companies began the serious task of having to compete.

In effect, the import duty “protected” by allowing the American companies to remain inefficient. Only after the Japanese carmakers built their plants in the U.S. that the American companies had to trim their workforce to compete. And by the way, the workforce that went to work for the Japanese carmakers were non-union and got lower pay.

Imposing import duty across the board on goods made in China would be wrong-headed and even more disastrous than asking the American consumer to pay more for their cars.

Most of the consumer goods made in China such as apparel, shoes, toys, and hardware haven’t been made in America in decades. There are no domestic industries to protect and the import tax would just add the daily cost of living for every American.

American companies did not establish plants in China just for low cost labor but also to serve a growing local market there. The personal computer is an illustrative example.

The PC used to be assembled in Taiwan and then the Taiwanese companies moved to the mainland because of the significant savings in labor. Economic pressures forced their component suppliers to follow them. Component suppliers for the PC came from Japan, Korea, Taiwan as well as the U.S.

Intel combined its China and U.S. manufacturing to stay competitive

One of the U.S. suppliers was Intel. They first set up an integrated circuit assembly and test plant in Chengdu to perform the final manufacturing steps on the microprocessors made in the U.S. The finished ICs were then shipped to the PC makers all over China.

Gradually as China become a major consumer of PCs, Intel expanded their operations in China, not only at Chengdu but also added a semiconductor fab operations in Dalian.

However, even today Intel continues to make 75% of their semiconductor chips in their U.S. operations even as 75% of their market is outside of the U.S.

Intel’s total U.S. manufacturing payroll is much higher than its payroll for their Chengdu operation, even though the number of workers employed in Chengdu is “orders of magnitude” bigger than the number engaged in the U.S.—according to my source inside Intel.

The explanation is that the U.S. manufacturing steps are technology intensive and highly automated. Not many workers are required but each has to be highly trained and very well paid. The Chengdu operations involving test and packaging require many workers, but each does not have to be highly technical nor highly paid.

Taking advantage of the comparative advantage (that’s jargon from Econ 101) of each place gives Intel the means to maintain their technical dominance over their competition. This is nothing to do with currency manipulation, just simple economics.

Most of the American companies that set up operations in China may have the low cost labor in mind initially but subsequently justified added investments because China had become a huge market in its own right.

In some cases, China did impose import duty on foreign made products and thus encouraged the American companies to operate inside China—just as Reagan’s import duty encourage Japan’s auto makers to move into the U.S.

In the end, the local investment benefitted the foreign investor but also China’s economy with a more skilled workforce. The same could apply in the reverse, i.e., as regards to China’s investments coming into the U.S.

Chinese companies are looking to invest in the U.S. to be closer to the major markets here. They certainly wouldn’t be looking for lower cost of labor but would be paying higher salary for more technically demanding jobs. This could only benefit the local economy in the U.S.

Xenophobia and stupidity should not discourage these investments just because they are from China.

Navarro makes no bones about demonizing China in everything he has said but is he really compatible with Donald Trump’s real personal interests?

Last month, a video of Trump’s granddaughter, Arabella Kushner, won the hearts of millions of Chinese by reciting a poem in Chinese. This suggests that Trump’s daughter, Ivanka, and her husband, Jared Kushner, understand the importance of learning Chinese in their 5-year old daughter’s future. Surely they have more influence on Ivanka’s father than Navarro?

Sheldon Adelson has been one of Trump’s major supporters. His billions of net worth is tied to majority ownership of Las Vegas Sands and more than 60% of revenue and profits of the company is derived from Macau. He could hardly be pleased if Trump were to deliberately raise the tension between the U.S. and China.

China exercises its international influence far differently from the American way of relying on military alliances. Close to 100 countries have China as their largest trading partner. Among them, some 60 plus are also members of the Asian Infrastructure Investment Bank or are recipients of AIIB investments. Their relationship with China is based on common economic interests.

The Trump Administration should also consider the merits of developing a bilateral relations based on shared economic interest.

Bilateral basis for common economic interest

Consider for example the economic benefits of tourism from China to the U.S. Last year, less than 3% of China’s total outbound tourists came to the U.S. and they spent over US$30 billion. That was the first full year when the Chinese were granted 10-year, multi-entry visas to visit the U.S.

The future impact of Chinese tourists on the American economy will continue to grow exponentially, provided of course that the U.S. and China are not engaged in some mano a mano test of military armament.

There are over 330,000 Chinese students studying in the U.S. in the academic year just past. According to the Department of Commerce, these students contributed US$11.4 billion to help prop up the finances of the U.S. universities as well as the local economy.

Not to be overlooked another benefit of these students is that as much as 75% of the graduates would prefer to stay and work in the U.S. if the U.S. would permit.

China produces many more times graduates in science, technology, engineering and mathematics than the U.S. can produce. They are just the talent pool American companies desperately need to keep their plants operating and not having to move them offshore.

Trump has to understand that America is losing jobs to automation and technological advances and not to China. Someday, for example, Uber is going to rely of self-drive cars and all the drivers will have to find another job. Amazon will use drones to deliver their packages and UPS will have to either operate the drones or else find some other line of work.

Encouraging the employment of Chinese graduates will buy Trump time to figure out how to save high paying jobs that will stay ahead of the technology evolution. America’s future lies in generating highly qualified and skilled workers and not in bringing back low paying jobs from overseas.

Thus, we hope that Trump will have the wisdom to look for the win-win approach with China. To promote Navarro’s line of military confrontation and a restart of a nuclear race can only lead to lose-lose outcome and such outcomes would be devastating beyond imagination.

Path to America Being Great Again Runs Through China

This first appeared in China US Focus.

Now that Donald Trump has won the U.S. election to become the 45th president, everybody is offering his/her idea of how Trump will make good on his promise to make America great again. He does have the opportunity to make policies free from the burdens of the past.During his rough and tumble campaign, he expressed some ideas worth noting. He seemed weary of having the U.S. carry the sole burden of basing troops around the world, and he said more than once that he wanted to find ways to get along with other nations.

He also reiterated on numerous occasions that he would transform America’s infrastructure into the best in the world. With careful examination, these two positions could represent real cornerstones toward making America great again.

Importance of infrastructure investments

Once the best in the world when these investments were made in the ‘50s and ‘60s, everybody now recognizes that America’s infrastructure is badly in need of repair and replacement. The question has come up many times but there has been a lack of Congressional will and consensus to allocate the necessary funds. With a Republican majority in both houses, Trump would have the best opportunity to get something done.

Lest there are any doubts, the lead-tainted drinking water of Flint Michigan and the Minneapolis bridge collapse serve as stark reminders that infrastructure improvement is a real and urgent issue. According to the EPA, the U.S. will need $384 billion investments for the drinking water treatment and distribution to remedy the situation in places like Flint and to prevent future tragedies in other economically blighted areas of America.

There are 700 bridges in the U.S. in the same category as the bridge outside of Minneapolis that collapsed that are potential candidates for retrofit or replacement in order to prevent another rush hour collapse. The bridge in Minneapolis cost well over $200 million to replace. Thus the total potential tab to assure the safety of all the bridges would be in the ballpark of $100 billion plus depending on the actual number in need of remediation.

Trump did say as part of his acceptance speech, “We are going to fix our inner cities, and rebuild our highways, bridges, tunnels, airports, schools, hospitals. We’re going to rebuild our infrastructure, which will become, by the way, second to none. And we will put millions of our people to work as rebuild it.”

Trump hasn’t said exactly how he will find the funds to invest. There is a real solution that does not require pulling the wool over the public’s eye and that would be via reallocation of resources by changing national priorities.

Trump’s “get along” foreign policy

Again referring to his acceptance speech, he said, “At the same time we will get along with all other nations willing to get along with us. We will have great relationships…We will deal fairly with everyone. All people and all other nations. We will seek common ground not hostility, partnership not conflict.” Taken at face value, Trump’s position could represent a sharp and refreshing departure from the disastrous foreign policy of his two predecessors.

When George W. Bush became president, he bought into the neoconservative idea of regime change to support U.S. economic and political ends. Bush got his regime change in Iraq, but ended up with an unmitigated disaster: regional instability, out-of-control worldwide insecurity, and atrocious acts of inhumanity. His inability to close the military campaign in Afghanistan and Iraq had already cost the U.S. trillions of dollars by the time Obama succeeded him.

Indeed in the televised debates as he criticized the U.S. military engagement, Trump said we’re better off spending $4 trillion—referring to the amount already spent on the military misadventure—“to fix our roads, our bridges and all of the other problems, we would’ve been a lot better off.”

Tragically, Obama, instead of making the course correction as mandated by his election, continued the mission to bring about regime changes. Obama justified his interference-based foreign on the attitude of American exceptionalism.

Secretary Clinton has been given full credit, and deservedly so, for the regime change she brought about in Libya and the rise of ISIS because the U.S. wanted regime change in Syria rather than snuffing out the beginnings of the Islamic jihadist movement. Consequently, Syria descended into chaos and became the base for ISIS. She and Obama should bear full responsibility for the refugee crisis in the Mediterranean spreading into Europe.

Unfortunately for Trump, he can’t ignore the conflagration of the Middle East that he will inherit from his predecessors. But he can avoid creating more conflicts and new regional tensions elsewhere if he sticks to the idea of getting along with everybody. The reality is that getting along is far less costly than confrontation.

He apparently has figured out how to get along with Putin and Russia. In the case of China, Trump has the opportunity depart from the past. Both Bush and Obama tried an approach of strategic ambiguity, friends sometimes, and confrontational at other times. American attitude towards China has been specifically because of the neocon idea that the U.S. needs to rule as the world hegemon and not because of any provocation from China.

The two American carrier groups that sailed into the South China Sea was a case in point. The Obama Whitehouse mobilized the flotilla to protect the “freedom of navigation.” That was a bogus non-issue and a pretense for a show of force. Navigation in South China Sea has not been in peril before or after the appearance of the American Navy.

Another example is the supply base China has established in Djibouti. When China began to send its naval ships to patrol the coast off the horn of Africa and help protect commercial ships from the pirates, everybody applauded China’s participation. Now that China has contracted with the government of Djibouti to install a support base for its naval ships, the U.S. expresses alarm. The U.S. has close to one thousand bases around the world but appears intimidated by China’s one. Go figure.

The incoming Trump Administration could find China’s relationship with Djibouti instructive. China is building a second major airport in Djibouti, expanding and improving a new port facilities for commercial shipping and will lend US$1 billion to finance other infrastructure projects in Djibouti including a water pipeline and a railway link to neighboring Ethiopia. In other words, with Djibouti as with many other countries, China is making friends through economic collaboration.

Getting leverage by collaboration with China

China’s strategy is not a win-lose scheme for the U.S. unless the U.S. chooses to view it as such. Apparently Obama did [what?] because he tried to dissuade western countries from joining the Asia Infrastructure Investment Bank that was proposed by Xi Jinping. Others saw what Obama didn’t— namely infrastructure improvements are good for not just the recipient country, but for everybody else, based on the idea that rising tide raises all boats.

Trump should realize that it’s not an advantage for the U.S. to compete with China’s way of making friends via economic cooperation Instead, the new administration should look for ways to leverage from China. For instance, China has been the largest contributor to the U.N. peacekeeping force and vowed to add to their total. The U.S. hasn’t shown much interest in working within the U.N., but Trump should like the idea of letting China pay the bills for safe guarding world security.

The U.S. defense budget, including services to the veterans, approaches $900 billion annually. When off-budget spending, such as the use of contractors, is added to the military spending, the yearly tab is well over $1 trillion. America can finally reap some of the peace dividends from the collapse of U.S.S.R. by taking the need to contain and confront China off the table. Money not spent on militarization would be funds available for the infrastructure improvements.

From his campaign rhetoric, Trump has accused China of currency manipulation, i.e., keeping its renminbi artificially weak, and taking jobs from America. As others have pointed out, lately China has been manipulating its currency to keep it from getting too weak. So much for that accusation.

As for “losing jobs to China,” this has been a favorite dead horse to beat for their votes. Informed voters know that low paying jobs, such as making shirts and sport shoes, left the U.S. decades ago for such places as Taiwan and South Korea. Now, these industries are leaving China for Bangladesh, Vietnam, and elsewhere where the cost is lower. This phenomenon is like water flowing downhill. Try to dam the flow is like imposing an import duty. It will stop the flow momentarily but the American consumer will be the ultimate loser having to pay the higher price for the goods, now made in the USA.

China has not been wasting their energy accusing Vietnam and Bangladesh of stealing their jobs. Instead, China has been concentrating on automation, domestic design, and innovation in order to make products and provide services with values higher on the economic food chain. How to profit from China’s development should be the focus for the Trump Administration, rather than trying to stop China’s effort.

Other countries prefer working with China

Chinese companies, in seeking to make higher value products, have become active investors in the U.S. seeking synergy via collaboration with American firms. Synergy works in both directions, and foreign direct investments from China into America will create high paying jobs and be good for the local economy. Finding excuses, some specious and others from xenophobia, to halt and discourage inbound investments from China will lead to lose-lose outcomes. The new administration will want to work with China and encourage a trend of collaboration instead of responding with xenophobia.

Elsewhere in the world, China has been promoting their One belt, One road (OBOR) Silk Road initiative along with AIIB. OBOR is short hand for infrastructure projects that China is interested in investing and collaborating with host countries near and far. Collaborating nations understand that these are not handouts with hidden restrictions but are risk sharing, mutually beneficial projects.

Since the financial crisis of 2008, China has invested heavily in infrastructure projects inside China. They too understood that improved infrastructure will stimulate the economy and facilitated growth in the ensuing years. A side benefit is that they have gotten really good at managing and executing highway and high-speed rail projects. This is another reason countries along the silk roads are confident of the outcome and keen to work with China.

Trump may not want to invite Chinese companies to take over infrastructure projects in the U.S., which is surely a way to draw political heat. However, China could offer material benefits in helping to manage some of these projects. Their expertise in bridges, highways, extreme tunnels, and high-speed rails could help bring in infrastructure investments within budget and on schedule.

Unfortunately, by taking an unprecedented telephone call from Taiwan’s president Tsai Ing-wen as president-elect, the Trump organization is giving a hostile signal regarding to how he will deal with China after becoming president. There can be no profit for anyone in raising the tension across the Taiwan Straits. China has apparently countered by taking an American owned underwater drone on the basis that such object would be hazardous to “freedom of navigation.”

Apparently, Trump is falling under the influence of the same set of neoconservatives that have advised Bush Jr. and Obama and created the debacle in the Middle East. They have wreaked nothing but death and destruction on the world, while caused U.S. spending to careen out of control. However, Donald Trump does not have to buy into the idea that America’s path to greatness lies in bringing about regime changes around the world, nor by raising the stakes of confrontation with China. If the new Trump Administration can stop being suspicious and hostile and find ways to work with China, he would be taking a major step to making America great again.

The Yin and Yang of Management Practices

A book review: "From the Great Wall to Wall Street" by Wei Yen.

The author has made a valiant attempt to explain why the business executive from China thinks and acts differently from his/her counterparts in the U.S. or the West. He does so by comparing the legacy of Confucius, Laotzu and other sages from the Chinese culture to Socrates and other western philosophers. He calls the Chinese approach wholistic and the American approach direct and rational. Each has its strengths and weaknesses and the author suggests that some combined methodology to management may be the optimum.

Author Yen also attributes the Chinese concept of yin and yang as a cause of misunderstanding and mistrust between the Chinese executives and the American. Readers might find some of his discussion of the contrasting philosophies esoteric and not grasp the relevance to modern practices. I find his comparison of Clausewitz and Sun Tzu particularly relevant and insightful.

Von Clausewitz promoted the idea of striking where the enemy was most concentrated in order to annihilate the enemy forces and achieve total victory. Whereas Sun Tzu's Art of War stressed winning the war without having to fight even one battle as the best of all possible outcome. He considered not just the physical conflict but also the psychological aspects of warfare. If deception, psychology and persuasion can convince the enemy to surrender, so much the better. Clausewitz's idea is direct, logical and analytical. Sun Tzu's is nuanced and looks at the whole picture.

The author used taichi, a form of martial arts also known as Chinese shadow boxing, and weiqi, a subtle Chinese board game, as metaphors for the Chinese style of management. Thus while the American manager takes a direct and rational approach to solving problems and does not consider consequences of human emotions, the Chinese manager looks for solutions that preserve harmony and minimize hurt feelings. He also explained the importance of quanxi and face in the Chinese way of doing things.

This is a book that I wish I could have written to promote the mutual understanding of East and West. I deduct a star from this review because the book could have benefitted from professional editing to tighten some of the prose and reorganize the chapters to make them more uniformly even. A simple spell check would have eliminated some annoying typos, which I am surprised that the publisher apparently did not do.

How Donald Trump Can Make America Great Again

This first appeared on Asia Times.

President-elect Donald Trump promised to make America great again. Now that he won the election, the question is how?

On different occasions during his campaign, he has indicated that he would find ways to get along with other nations and transform America’s infrastructure into the best in the world.

If we give these two positions serious consideration, we could easily conclude that they do represent real cornerstones toward making America great again.

There isn’t much question that America’s infrastructure, once the best in the world when these investments were made in the ‘50s and ‘60s, are in need of repair and replacement.

Lest there are any doubts, the lead-tainted drinking water of Flint Michigan and the Minneapolis bridge collapse would serve as stark reminders that infrastructure improvement is a real and urgent issue.

According to the EPA, the US will need US$384 billion investments for the drinking water treatment and distribution to remedy the situation in places like Flint and to prevent future tragedies in other economically blighted areas of America.

There are 700 bridges in the US in the same category as the Minneapolis bridge that collapsed, and are potential candidates for retrofit or replacement in order to prevent another rush hour collapse.

The bridge in Minneapolis cost well over US$200 million to replace. Thus the total potential tab to assure the safety of all the bridges would be in the US$100 billion plus level depending on the number that are actually in the dilapidated state and in need of remediation.

Roughly one-fifth of the roads are in poor condition and in need of repair according to the Federal Highway Administration. No estimated tab is available but the Council of Foreign Affairs said, “Cost estimates for modernizing run as high as [US]$2.3 trillion or more over the next decade for transportation, energy and water infrastructure.”

Trump did say as part of his acceptance speech, “We are going to fix our inner cities, and rebuild our highways, bridges, tunnels, airports, schools, hospitals. We’re going to rebuild our infrastructure, which will become, by the way, second to none. And we will put millions of our people to work as rebuild it.”

He hasn’t said exactly how he will accomplish this goal. One scheme being bandied about by some of his alleged economic advisors is to propose a private sector solution, meaning that private investors would undertake the infrastructure rebuild in exchange of tax credits and revenue stream.

This seeming something-for-nothing scheme is misleading, as critics have pointed out. Private investors won’t be suckered into putting money into say a highway unless they can expect to be rewarded by the toll revenue. The user pays the toll and the user is none other than the Mr. or Mrs. Taxpayer.

However, there is a real solution that does not require the need to flim-flam the public.

Again referring to his acceptance speech, he said, “At the same time we will get along with all other nations willing to get along with us. We will have great relationships. …We will deal fairly with everyone. All people and all other nations. We will seek common ground not hostility, partnership not conflict.”

Taken at face value, Trump’s position would represent a sharp and refreshing departure from the disastrous foreign policy of his two predecessors.

When George W. Bush became president, he bought into the neoconservative idea that time had come for Uncle Sam to take over the world. He invaded Iraq with the view of bringing about regime change as a step toward world domination.

Bush got his regime change but ended up with an unmitigated disaster: regional instability, out-of-control worldwide insecurity and atrocious acts of inhumanity. His inability to close the military campaign in Afghanistan and Iraq had already cost the US trillions of dollars by the time Obama succeeded him.

Indeed in the televised debates as he criticized the US military engagement, Trump had said we’re better off spending US$4 trillion “to fix our roads, our bridges and all of the other problems, we would’ve been a lot better off.”

Tragically, Obama, instead of making the course correction as mandated by his election, continued the mission to bring about regime changes.

Secretary Clinton has been given full credit, and deservedly so, for the regime change in Libya and the rise of ISIS because of the American attempt for regime change in Syria. She and Obama should bear full responsibility for the refugee crisis in the Mediterranean spreading into Europe.

Unfortunately for Trump, he can’t ignore the conflagration of the Middle East. But he can avoid creating more conflicts and new regional tensions elsewhere if he sticks to the idea of getting along with everybody.

He apparently has figured out how to get along with Vladimir Putin and Russia. He needs to do the same with China. To do otherwise, i.e., to continue efforts designed to contain and confront China will cost money, lots of money.

Money not spent on military build-up to face China would be funds available for the infrastructure improvements.

His only beef with China seems to be “losing jobs to China.” This issue has been a cheap shot from sleazy politicians and should be out of fashion by now.

Low paying jobs in textiles and sport shoes left the US decades ago for such places as Taiwan and South Korea. Now these industries are leaving China for Bangladesh, Vietnam and elsewhere, where the cost is lower.

China has not been wasting their energy accusing Vietnam and Bangladesh of stealing their jobs. Instead China has been concentrating on automation, indigenous design and innovation in order to make products and provide services with values higher on the economic food chain.

Chinese companies in seeking to make higher value products have become active investors in the US seeking synergy via collaboration with American firms. Foreign direct investments from China in America will create jobs and be good for the local economy.

The new Trump Administration will want to work with China and encourage this trend instead of responding with xenophobia.

Elsewhere in the world, China has been creating quite a stir with their one belt, one road Silk Road initiative. OBOR is short hand for infrastructure projects that China is interested in investing and collaborating with host countries near and far. Collaborating nations understand that these are not handouts with hidden restrictions but risk sharing, mutually beneficial projects.

Since the financial crisis of 2008, China has invested heavily in infrastructure projects inside China. Those projects kept China’s economy strong and facilitated growth in the ensuing years.

A side benefit is that they have gotten really good at managing and executing highway and high-speed rail projects. This is another reason countries along the silk roads are confident of the outcome and keen to work with China.

If invited to participate in America, Chinese companies would be in the position to help conclude the infrastructure projects within budget and on schedule.

It’s time to throw the neocon rascals out and shut them out of the mainstream. They have wreaked nothing but death and destruction on the world while spending out of control.

Donald Trump owes no fealty to the doctrine that America’s path to greatness lies in bringing about regime changes around the world.

If the new Trump Administration can stop having to pretend to be friends and find ways to work with China, he would be taking a major step to making America great again.