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Responding To: 中美脱钩真的可行吗?

A Tale of “Myth” and “Reality”

Yunfei Dai


The panel "U.S.-China Decoupling: Separating Myth From Reality" presented a professional screening of the U.S.-China economic relationship and suggested that a total decoupling is not likely given the level to which the Chinese economy has been integrated into the world. Part of its caption, “separating myth from reality”, appears to me as an inspirational narrative to look at the current U.S.-China economic decoupling. Beyond the “reality” — business and corporate decisions made, which are interpreted through economic data, what is the “myth”, and how do we look at them together?

The decoupling question is analyzed in the panel through a perspective that is highly concentrated on the side of economics, with objective macro data and micro surveys reflecting corporations’ intentions and expectations of a “decoupling” with China. One peripheral but important takeaway from the panel is that the U.S.-China decoupling, a problem defined economically, is by nature double-edged. From the political perspective, the decoupling issue could fall into nations’ policies that define the realm of corporate actions. From the economic aspect, however, the actual likelihood of decoupling is left to businesses themselves to decide.

From the panel, tech analyst Dan Wang demonstrated data showing China’s exports of light industry goods and electronics, as well as Foreign Direct Investments in recent years to be steady if not rising. He suggested that China still appears favorable to technology manufacturing because of its overall production efficiency and scale. Even though Southeast Asian countries like Vietnam, India, Malaysia, and the Philippines appeared among top destinations for companies to move, according to senior economists Wang Tao’s survey. Jörg Wuttke, BASF chief representative in China, pointed out from a business operation perspective that China remains highly competitive over many of its potential substitutes in areas such as industrial combined effect, infrastructure, and country risk. In short, leaving out sensitive industries, a total U.S.-China decoupling looks impossible given how China has been doing and what it is good at in the global supply chain.

The above discussion has focused mostly on economics, leaving out the political aspect of the issue, which could be the general public’s first and foremost impression when encountering the word “decoupling”. Decoupling often appears to be a matter of political confrontation, a war for policymakers over national interests. Interestingly, if on the “economics” side of decoupling, individual firms under capitalism efficiency principles are pro-globalization, so they would actually be in opposition to the nationalistic policymakers who advocate against free trade. From individual firms’ perspective, its operation will be solely driven by suppliers of competitive advantage rather than irrelevant political concerns such as national interest.

Thus it becomes important to ask: How do the political and the economic aspects interact with each other? How could a combined lens provide insight to U.S.-China decoupling? In general, with policies and regulations serving national interests setting bottom lines within relevant industries, individual firms will make their optimal cost-effectiveness decision within the guidelines. For core industries of political concern, such as technology, policies and regulations would explicitly define “what cannot be done”, and usually the space left for firms’ decision making appears tiny. Take Huawei as an example, recent restrictions imposed by the U.S. government would rigidly limit Huawei’s access to semiconductor-related technology, and there’s no way Huawei could be against it. But what about industries not so concerned in the decoupling?

Compared to sensitive industries where the political aspect of decoupling dominates decision-making, corporations from other industries may need more than some given reasons to go on a sophisticated leave from China. In this case, how do political aspects, surges of nationalistic populist ideas, versus the economics, and actual benefits of decoupling from China impact those firms’ decisions? What do international firms do when they have several options to take? Do they leave China or keep investing? Such business decisions made, given popular political discourse, can actually be strong proof of economic favorability/unfavorability towards China, and reflect objective attractiveness and profitability of related operations. Leaving out certain areas of disputes, it seems current confidence in China is still there. Just as Wang Tao also stressed on the significant demand of the Chinese market, it is unlikely that China is faced with huge losses. Besides, as the panelists mentioned, the COVID-19 situation will act against intentions of huge shifts or adjustments.

However, it does become likely that decoupling would happen in specific industries, with the most notable one being semiconductor. Jimmy Goodrich, VP for global policy at SIA, pointed out in the panel that China currently lags behind in technology, capacity, and division of labor of the semiconductor value chain, and it may takes years ranging from few to more than a decade to catch up depending on specific areas. With the U.S. policy ban on Huawei and ZTE finalized on June 30, 2020 and Chinese companies shifting to non-U.S. suppliers, it seems a semiconductor decoupling between the United States and China is likely.

For huge countries like the United States and China, decoupling, in different forms, will hardly be unexpected on their agendas. If we were to boldly imagine a world after semiconductor decoupling, a likely situation is where the United States and China set and introduce parallel standards of technology products where the consumer and industrial electronics are incompatible with each other. This would be indeed a far future from now and it is reasonable to suspect either side may become a major beneficiary from it. At the same time, it is also rational to suspect the overall efficiency of mankind to be well below the optimal in that future.

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