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April 24, 2017

Responding To: U.S.-China: Addressing and Building Strategic Trust

Trust by Design

Vicky Gu

On the surface, the United States and China have a working relationship: official diplomatic relations opened up in 1979, and interaction on a myriad of bilateral and global issues is extensive. However, many on both sides view the relationship to be driven by transactions more so than trust. Long-term strategic trust thus must be designed with intention, paying heed to the macro forces of political change and trade. What would it look like to design frameworks to facilitate cross border trust? Given the current political and economic climate, there is prime opportunity in the spheres of commercial currents and leadership communications.

Commerce by Design

When diplomacy stalls, commerce keeps pushing forward. International trade introduces a freer avenue of communication that bridges both private and public sectors. While private firms must be cognizant of roadblocks, they should also recognize their power to shape the growth of infant industries across borders—to disrupt trade through nontraditional avenues.

Foreign direct investment (FDI) between the United States and China flows through either green field investment (new projects) or acquisitions (of at least a 10 percent stake). From 1990 to 2015, 89 percent of FDI from China to the United States financed acquisitions, while 72 percent of capital transferred from the United States to China has financed green field projects (The US-China FDI Project). However, as China’s labor and manufacturing market loses its competitive edge, these allocations will change. National Trade Council Director Peter Navarro should recognize China is in a state of transition “from the old model—investment and exports—to the new model, investment and consumption” (Council on Foreign Relations). U.S. firms are already beginning to shift focus from Chinese makers to Chinese clients and consumers.

The service-oriented global innovation and design industry exemplifies this phenomenon. From product design to new business venture design, the emphasis on empathy and cultural understanding naturally breeds trust. If design firm IDEO has “inherited the optimistic spirit of California with a deep understanding of the cynicism from Europe,” the next questions are: “What is Asian style? What are Chinese elements?” (IDEO). Instead of blindly pushing through to simply penetrate the Chinese market (e.g. leading technology firms like Google, Facebook, Uber), private firms have more space and resources to dive deeper into Chinese needs.  Clusters, tiers, provinces...China is a maze of cultural idiosyncrasies. Firms must be all the more vigilant in separating cultural bias from situation assessment and decision-making.

Yet humble attitude notwithstanding, foreign innovation strategy firms have the responsibility to communicate the importance of sustainable design, taking into account Chinese firms who have never been exposed to it. Frog Design had no business the first six months following their 2007 Shanghai office opening; domestic firms simply couldn’t justify the time and cost of innovation strategy (FastCo). They adapted their client acquisition strategy by offering smaller teaser projects to introduce the concept of design thinking and purpose of social design. Since then, their client list has expanded to the likes of Huawei, China Mobile, and Haier. Though not the traditional spaces of energy or real estate, design is precisely the space to build new models of trust through trade.

Communication by Design

While multinational corporations have the strength of mobility, it results from diplomatic institutions and policies that allow for innovation. High-level communication structures undergird interaction which undergird trust. The recent overturn of U.S. political leadership ushers in opportunity for new models of communication, as President Trump’s polarizing persona strikes both more similarities and differences with Chinese leadership. New interactions will be an interesting meeting point of Trump’s bravado and Xi’s temperedness. Yet in retrospect, Trump’s campaign to make America great again sounds remarkably akin to Xi’s message on the “rejuvenation” of China, delivered during China’s own leadership turnover at the 2012 National Congress of the Communist Party (CFR). Both champion national revitalization yet channel ambivalence on globalization (e.g. U.S. withdrawal from the Trans-Pacific Partnership, Communist Party consolidation). With Trump and Xi both rooted in nationalistic allegiance, this creates overlap to understand each other’s intrinsic motivations.

On the practical level, structures must be mindfully tailored to the main parties interacting—in this case, senior leaders of the United States and China. Communication frameworks should be crafted with intention, incorporating tradition and disruption. Accordingly, the Trump administration will decide which existing models of dialogue to pursue, adapt, or drop: the Strategic and Economic Dialogue, Joint Commission on Commerce and Trade, Strategic Security Dialogue, bilateral investment treaty conversations, and the likes.

That’s all well and expected—but groundbreaking change, change that builds rather than erodes trust, can also be unexpected. This entails reevaluating the multiple dimensions of communication: physical and digital, personal and corporate, structured and flexible (CFR). We’re in an age where tensions can arise from Twitter and ease through a phone call. High-speed jets, virtual reality meetings, artificial intelligence and linguistics—who knows what the feasible future holds?

Yet no matter where technology leads, the need for consistency and human touch points will always prevail. American leadership should continue to take initiative in cultural intimacy, as attempted by the Obama administration during Xi’s 2013 delegation hosted at the “shirt sleeves summit” at the Sunnylands estate (Washington Post). Xi unsurprisingly maintained his guard, but the dynamic will undoubtedly evolve during Xi’s 2017 visit to Trump’s Mar-a-Lagos estate (Wall Street Journal). Friendship: that is what will turn the relationship from working to flourishing, built by trust through the uncertainties.

Vicky Gu is a senior at Georgetown University studying finance and international business.

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