A few months ago I was interviewing salespeople in luxury boutiques like Louis Vuitton and Gucci along 5th Avenue in New York. “60 percent of our customers are Chinese,” a salesman at one store told me. “20 percent are Brazilians, and the rest are Europeans and Americans. A few years ago, it was mostly Americans, but not anymore.”
Recession-themed newsprint cuttings
There are some retail outlets in the U.S. that have been wise enough to adapt their strategy to accommodate high-spending Chinese tourists, including hiring more Mandarin-speaking salespeople. But not all American retailers are that foresighted.
The New York-based Asia Society, recently issued a report saying that the US could lose out on $1-2 trillion of investment from China in the years ahead. Why? Fear mongering about China by American politicians and businessmen like Donald Trump has made Chinese think twice about investing in the U.S.
Two trillion dollars in investments could go a long way toward getting Americans off unemployment rolls and lowering China’s trade surplus. Instead of spurning Chinese money, the U.S. should be welcoming it as Spain and Greece have been doing.
Three years ago, at the onset of the financial crisis, my firm interviewed senior executives from 100 Chinese companies in 10 sectors. Over 70 percent told us they expected to accelerate investment in the U.S. and Western Europe to take advantage of low valuations and easy credit.
Now, that has all changed. In recent interviews, most executives told us they plan to focus on Europe rather than the U.S. because they fear increasing anti-Chinese sentiment here. Cases like telecom giant Huawei’s rejected attempt to acquire 3Leaf Systems have made them nervous, while in Europe the welcome mat is being rolled out for investors.
The Americans need to have a bogeyman to hate. It was Japan in the 1980s, but now it is a strong ally of the US and a bulwark against China. Today that role has been filled by China.
From the hysterics of Trump to the writings of economist Paul Krugman, who argues that China manipulates its currency to keep Americans unemployed, pundits are painting China as evil everywhere you look.
To listen to New York senator Charles Schumer, America's economic ills are due more to poor Chinese slaving away for $150 a month making iPads and Nike sneakers than the excesses of Wall Street and the American inability to live within its means.
The stakes are much higher than just $2 trillion dollars in investment. China could emerge as a serious threat. Right now they are not. Most people in China actually like Americans – and not just common folk. One high-ranking official who often gets pilloried in the Western press told me, “I don’t understand why they keep criticizing us. I love America.”
Xi Jinping, the next likely president of China, has sent his daughter to Harvard, so have several senior Chinese politicians in recent years.
However, Chinese also have a deep mistrust of the US government because they know its rhetoric can get heated and they view the U.S. as a war-loving nation. But China has the potential to rival American military power in coming decades. It also has a chip on its shoulder about being kept down by foreign powers from over a hundred years ago during the Qing Dynasty period.
To offset growing tension, we need more economic interdependence. It’s a lot easier to get people to come to the table and talk rationally when money is at stake.
Much of the blame lies with President Obama, who has not clearly defined the U.S. relationship with China. Are we allies? Friends? Enemies? The American public looks to the president to define relationships with other countries and his administration needs to do that this week during the Strategic Economic Dialogue between the two countries.
Shaun Rein is the founder and managing director of the China Market Research Group (www.cmrconsulting.com.cn) a strategic market intelligence firm, and is based in Shanghai. Follow him on Twitter at @shaunrein.