All Business

FEAR OF A NEW RED MENACE

Our paranoia about China is getting ridiculous. It’s time to get over it.

STEVE MAICH August 15 2005
All Business

FEAR OF A NEW RED MENACE

Our paranoia about China is getting ridiculous. It’s time to get over it.

STEVE MAICH August 15 2005

FEAR OF A NEW RED MENACE

All Business

STEVE MAICH

Our paranoia about China is getting ridiculous. It’s time to get over it.

IT MUST BE mighty confusing to be in the government of China these days. You spend the better part of a decade trying to drag yourself out of the dark ages of Maoist Communism, gradually adopt the ways and values of Western capitalism, and then even when you do precisely what your Western counterparts ask, you still can’t get a break.

Last month, China’s government finally bowed to Western demands, allowing its currency, the renminbi, to rise for the first time in more than a decade. It was a tiny move, just two per cent, but it might end up being the most significant baby step in modern economic

history—not because of what it will accomplish, but because of what it represents.

For years China has held its currency down to help its manufacturers sell to the West. The result has been a flood of inexpensive Chinese imports, and an equally steady loss of manufacturing jobs in North America. The U.S. in particular has seen its trade deficit with China explode, driving down the U.S. dollar and threatening to derail the world’s biggest economy. So when the People’s Bank of China responded to the pleas of U.S. officials in late July, it came as a major relief.

This tiny policy shift won’t solve America’s deep fiscal and economic problems, and it won’t halt the long-term slide of Western manufacturing industries. But as symbolic gestures go, it was a biggie. By lightly tugging the reins on its galloping economy, China is sending a signal to the world that it is willing to be a good customer as well as a ready supplier. More important, it’s an acknowledgement that China’s runaway growth can’t go on forever at the expense of everyone else.

You’d think all this might buy Beijing a little slack in North America. You’d think somebody might notice that this is excellent news for global commerce on more sustainable and equitable terms. But no. Sinophobia—our unrelenting paranoia about a Chinese world economic takeover—is still in full force. We continue to portray China as a rapacious predator, and ourselves as its helpless prey.

The fearful wailing has been loudest in the U.S. Congress, where a broad coalition of Republicans, Democrats and ex-intelligence officials managed to kill the recent bid by

Chinese oil firm CNOOC Ltd. for Unocal Corp., denouncing it as a threat to national security. Opponents warned that China could use Unocal’s technology for military purposes (not likely), and that if wo rid oil shortages ever get really bad, the Chinese would divert production to fuel their own factories and cars (even less likely).

Empty redneck xenophobia? You bet, but we Canadians are no better. Recent overtures by Chinese companies to buy mine operator Noranda Inc. and Calgary-based Husky Energy were met with similar fear mongering. Under constant harping about China’s “voracious appetite” for natural resources, the Noranda offer fell apart, and the Husky rumours have gone cold.

All this is reminiscent of the mid-1980s,

when Japan was the world’s emerging economic juggernaut. Then, as now, the backlash against foreign investment was intense as nationalists called for tariffs to contain Japan’s rising power. Those fears look silly in retrospect, but that’s our history: we only like open trade when we’re clearly winning.

So it is with China. Its critics get free rein because international trade has few natural champions in the world of politics. On the left, the anti-globalization crowd screams for more protectionism to save unionized manufacturing jobs, while railing about China’s rotten human rights record. Those

complaints are naive and short-sighted, but at least they have a coherent logic to them. The anti-China screeds from right wingers aren’t so weighty. Take, for example, congressman Joe Barton, the Texas Republican who recently attacked the proposed Unocal takeover, saying “Red China” is run by “contemporary Communists who somehow learned to love profit but not freedom.” Mr. Barton simply hasn’t been paying attention. American firms have 23 times as much invested in China as vice versa. Major American companies—like Wal-Mart, Kodak and Anheuser-Busch—are doing huge business with Chinese customers who are happy to embrace them. If anybody is resisting the capitalist ideals of free-flowing markets and international competition, it’s us.

There are some who will say letting China get its hands on a major North American oil producer like Husky or Unocal is still a bad idea in an era of energy shortages. But consider the fact that a similar outcry greeted the recent attempt by a Chinese conglomerate to acquire Maytag. What’s the objection there? Are the nasty Communists going to topple Western democracies by seizing control of the dishwasher business?

Strip away all the alarmist rhetoric and we’re left with a pretty simple choice. If we want China to be a more open society, then deepening our trade relationship is a prerequisite. That means opening our shores to Chinese investment, just as theirs are gradually opening to us. The potential benefits—for security, commerce, environment and peace—are enormous. And the costs of isolation are just as staggering.

As long as we see China as a threat, it will be one. As long as we consider it a problem to be solved rather than an opportunity to be grasped, the potential of a better, more prosperous world will pass us by. China’s knocking on our door. It’s time we let it in. 171

Read Steve Maich’s weblog, “All Business,” at www.macleans.ca/allbusiness

ARE WE REALLY AFRAID

the Communists are going to topple Western democracies by seizing control of the dishwasher business?