By: Azhar Azam
But the US firms in the second-largest economy of the world aren’t at all being browbeaten by the president’s arm-twisting and have no ax to grind with his political ambitions that would dramatically raise their production costs and lose the vital competitiveness in a fiercely competitive global market.
A survey by the American Chamber of Commerce in Shanghai recently showed only fewer than 4% of the respondents were considering relocating just a fraction of their production to US, describing that a crushing majority had refused to bog down to Trump’s scathing pressure.
“Covid-19 hit the China economy hard in early 2020 but the recovery was quick,” said chamber president Ker Gibbs. Impugning Trump’s claim to transform the US into the manufacturing super power of world and end reliance on Beijing “once and for all,” Gibbs warned “American companies still see China’s consumer market as a great opportunity.”
The poll findings typified that the US president’s higher tariffs crusade, temptation to set up tax credits and persuade or coerce the American companies for reshoring their manufacturing facilities from China to the United States were hitting the wall.
Pandemic has already wreaked havoc on global consumption and severely affected operations and profitability of nearly all the enterprises, forcing them to lay off their workers with many of those filed bankruptcy. In such a sticky situation, they see a silver lining in Chinese growth and opening up for their survival and make up the losses.
Unconcerned with the agony Americans are going through, Trump is echoing the idea of decoupling from China. His hyperbolic statements to ramp up geopolitical tensions and grab an election win are “the number one concern” for the US business operations managers and American enterprises, being dragged to the edge of an abyss.
Amid a global jolt that pushed the major world economies “several quarters” away from returning to pre-pandemic growth levels – including the US, which shrank by 33% the most since World War II and the UK entered recession in the 11 years with 20.4% GDP plunge – Chinese economy recorded a growth of 3.2% in Q2-2020.
At the end of the second quarter of 2020, China’s current account and goods trade surplus had rebounded to post $119.6 billion and $161.3 billion, highest since 2008 and 1998 respectively. The country’s share of global exports now exceeds 17%, as compared to less than 14% in 2018.
An eye-popping data revealed how Beijing’s early response to disease and first see through the bitter end of the Covid-19 helped it to dash on the path of economic recovery. The White House is feeling threatened by Chinese return to growth, increasing role in the global trade and internationalization of yuan that could end dominance of the US dollar.
The US fear of China’s rise on the international arena as a leading economic power flows from the fact that Beijing is also one of the top world’s importers of goods and services and its drive to internationalize yuan could weaken the longtime sway of the greenback, something the Trump administration has frequently practiced to bullyrag other nations, on the international financial system.
China is now actively pursuing to further open up its capital markets for the foreign investors, which would add momentum for its sustained growth. With the optimization and completion of the Shanghai-Hong Kong and Shanghai-London connect programs, the global investment management corporations, financial service providers and banks are showing keenness to engage in Chinese markets more freely.
All these positive developments caught the attention of iconic financial institutions on Wall Street, which overruled Trump’s irascible policy to divorce Beijing and have started to get nods from China Securities Regulatory Commission (CSRC) to become part of the Chinese capital market revolution.
After the world’s largest asset manager, BlackRock won regulatory approval for a partnership with a state-owned bank in China and its rival Vanguard relocated its Asian headquarters to Shanghai, the trend continued as JPMorgan Chase is also gearing up to boost its stake in Chinese securities joint venture while Citigroup became the first US bank to receive a fund custody license in the country.
Commenting on the participation, Citi’s APAC (Asia Pacific) Head of Securities Services David Russell said “As international fund managers, securities firms, and insurance companies set up in China, we believe they will want a trusted service provider to help them mitigate risks and reduce costs.”
Just in the past year, the foreign fund managers have bought nearly $200 billion of Chinese shares and bonds, which The Economist expressed “Far from short-term greed, Wall Street’s taste for China reflects a long-term bet that finance’s centre of gravity will shift east.”
Experts agree China, while opening up and liberalizing its exchange rate regime, is quickly learning to manufacture high-tech and high-value goods to end its reliance on western nations. They are of the view that for the US, it is almost impossible to make low-value goods, which North America buys from Beijing and fret a few whether Washington would exploit Covid-19 to kill the globalization.
First hurt by Trump’s trade war, then screwed from his pitiful coronavirus handling and now gripped with the president’s decoupling – the US manufacturing and investment birds seem to have zero expectations from the federal government. So, they are downplaying the administration’s loony China policy and leaning toward Beijing to protect their commercial interests.
*This is one of my opinion pieces (unedited) that first appeared in "Global Village Space":
https://www.globalvillagespace.com/why-is-wall-street-leaning-towards-china-in-manufacturing-row/
https://www.globalvillagespace.com/why-is-wall-street-leaning-towards-china-in-manufacturing-row/