If you were a Chinese citizen visiting the United States for the first time, you would be extremely proud of your country's manufacturing prowess. In fact, you might return home believing almost everything sold in the US is made in China. You would wonder which nation needs the other more, and you would be convinced the time of the Han has come again.
Conversely, if you were an American citizen shopping for the holidays, you might return home both happy and sad. You would find notebook PCs for as low as $300, sub-$500 LCD TVs, jeans for $19.99, and children's toys so cheap you could buy for the entire neighborhood without bursting a $1,000 budget. You would also find that more than 90 percent of the stuff you bought had labels saying, “Made in China,” and that could set your heart racing. Your likely questions (and this was my experience): What exactly does my country, the West, and other places outside China make anymore, and have we taken globalization a mile too far?
They would be fair questions, except for the nagging feeling that perhaps there's more to the story than consumers in the West realize. Lately, I have been wondering if the Chinese are as lucky to be the world's manufacturing center as we think, or if Western business and political leaders have important reasons for fostering this dependency situation. What if transferring manufacturing activities to China were the West's way of achieving critical but publicly unstated goals? In other words, has China really won the global manufacturing war, or did it simply gobble up a Western Trojan horse?
OK, that may sound like lunacy. Why should Western nations and businesses collude when enterprises are supposed to be governed only by investor interest? But several nagging questions on the preponderance of manufacturing in China haven't quite gone away, and I've decided to raise them here. Why is so much of what we consume in the West (and now in many developing nations) being made in China? What are the longer-term implications of this for everyone? Who benefits most from this? Will the benefits be fairly spread out among business partners, regardless of location? And shouldn't the Chinese review the total costs of being everyone's manufacturing Mecca?
Each time I am asked to settle for conventional answers related to the efficiencies of a market economy — terms bandied about here include opportunity cost, the law of supply and demand, optimal manufacturing cost, and economies of scale — I come back to another set of worrying questions. What nation gives away its crown jewel without asking for something in return? What is the West getting in return for the large-scale transfer of manufacturing to China? What can derail this arrangement?
OK, you don't like conspiracy stories. Neither do I, but let's take a look at what could have been the alternative had China not been pulled into a tighter economic embrace with the West. We could be locked into another nasty arms race. (Some people think we are, though a less intense one.) Such a race may not have been as dangerous as the one with the Soviet Union, but it would still have been as draining for everyone. Today we have a somewhat friendly relation with China — there's a lot of tension underneath, I bet, but rather than trade punches, we are trading goods with the world's most populous nation.
We know much more about China than we did 20 or 30 years ago. Western business executives, middle managers, and others have been traveling, working, and living in China for more than 20 years. Many of them have become experts on the country and its culture, and many have developed strong personal relationships with the people and government officials. Though many are still concerned that an economically stronger China could pose a military threat to the US and its Western allies, I think the chances of this happening would be much higher if we were not business and economic partners.
Lastly, I believe it is harder now for China to disengage from the rest of the world, because its continuing prosperity and political stability depend more today on the strength of its economic engagement with the West. In some ways, therefore, the West has already achieved a great objective of pulling China in from the cold. Now we have to make the country an even more responsible member of the international community. These are worthy goals. Hopefully, we haven't overpaid.