US-China trading relations and economic impacts

U.S. CHINA TRADING RELATIONS

The objective of this work is to examine China and U.S. trading relations of Post-Tiananmen China from the perspective of Chinese businessmen. This work will answer the questions of:

In the context of the U.S. hostility towards China after Tiananmen incident, how privatized firms and businesses flourished along the southeastern coast of China during the 90s. focus on firms exports to the U.S. And affects of bilateral policies;

Chinese businessmen's early impression of U.S. And how they felt about the differences between business styles of the U.S. And China; and 3) how it is that such firms are affected during each of the major transitions or incidents later on, from Hong Kong's return to China's WTO concession, from September 11th to the recent financial crisis of the U.S., reflecting the bigger picture of China - U.S. tradings.

Finally, this work will discuss risks of opening China and what it meant for the value influences to the Chinese company managers.

INTRODUCTION

In 1989, the government of the People's Republic of China (PRC) massacred pro-democracy demonstratros in Tiananmen Square, the People's Republic of China "annual trade surplus with the United States has ballooned from $6.2 billion to $83.8 billion. This is the largest annual trade deficit the United States has ever run with any single country - outstripping even the historically large annual trade deficits that the United States has run with Japan." (Human Events, 2001) the imbalance in trade made the provision that the People's Republic of China needed to procure advanced weaponry from Russia.

I. CHINA EYES the HEGEMON (GRIES, 2005)

The work of Peter Hays Gries (2005) entitled: "China Eyes the Hegemon" states that the "...'strategic contradictions" between China and the United States are not seen solely in structural terms, however; Chinese analysts also pay close attention to its emotional and ideological dimensions. "Some very powerful people in the Bush administration have a truly insane desire to contain China..." according to Jiu Jung of Beijing University. It is related that while analysts in America hold a view of hegemony as being "an objective status or position...' (Gries, 2005) Hegemony (baquan) to the Chinese is a "subjective attitude or desire akin to bullying." (Gries, 2005)

Gries states that it is not therefore surprising that 'Chinese analysts have paid close attention to the influence of neoconservatives on American foreign policy. A cover story on the "neocons" in a fall 2003 issue of the Chinese journal World Affairs involved a lengthy interview with five Chinese experts who agreed on three central points..." (Gries, 2005) Those points are stated as follows:

1) the neocons favor unilateralism and military power over multilateralism and diplomacy. The magazine's cover design -- a U.S. flag composed of an aircraft carrier for the stars and U.S. missiles for the stripes -- reinforces the point;

2) Second, neo-conservatism involves a blend of idealism and offensive realism that sees democracy as the panacea for terrorism, China, and other global problems. According to Qin Yaqing, vice president of China's School of Foreign Affairs, Bush first began searching for enemies upon taking office, and the "neocons" acted as his guide." According to Gries (2005) in light of the fact that "...a respected moderate like Qin has such a malevolent view of Bush's intentions is reflective of broader Chinese fears about U.S. preeminence;

3) Since neocons view China as a latent but inevitable empire, they necessarily advocate a policy of containment. Current U.S.-China cooperation, therefore, is not likely to last long. (Gries, 2005)

The consensus among Chinese academics is that there will be an "imminent demise of the American empire..." And for example is stated that Xin Benjian "...of the Chinese Academy of Military Sciences argues that international opposition and economic and moral costs doom the Bush administrations "dream" of a "new Roman empire" to failure. The invasion of Iraq was generally seen in China as a turning point in the rise and fall of the American empire. Zhou Guiyin of the Nanjing School of International Relations argued in the summer 2003 issue of International Survey that the United States committed a strategic blunder by attacking Iraq, failing to match means and ends: "History repeatedly shows that military victories do not guarantee the realization of political objectives." Iraq, in Zhou's view, was a diplomatic defeat for the United States, leading to a decline in its soft power. Public intellectual Liu Xiaobiao goes further, asserting that "America's sun is not bright." (Gries, 2005)

It is interesting to note that the strategies of the Chinese geared toward curbing U.S. power "ironically overlap considerably with the strategies that American liberals advocate to shape a rising China into a peaceful, status-quo power. "Engaging" China and promoting trade, legal reforms, and China's participation in international institutions, liberals argue, will increase the likelihood that China will democratize and emerge as a U.S. partner over the course of this century. Chinese analysts have a point when they maintain that for many American liberals, "engagement" is merely a means to the end of "containment." But it is clear that China plays the same game, seeking to constrain the exercise of American power through bargaining, binding, and buffering policies. For instance, just as the United States uses its bilateral alliances in Asia to constrain China, China uses its seat in the un Security Council to constrain the United States. Both Washington and Beijing, in other words, frequently treat each other as giant Gulliver's to be tied down by tiny Lilliputians." (Gries, 20005)

II. PRIVATE BusinessES in CHINA

The work of Larsen and Kirk (2005) entitled: "Congress and the Updating of the U.S.-China Relationship" states the following Chinese proverb which is known in the West as the "Blind Men Feelings the Elephant' and is a proverb in which "...several blind men, each touching a different part of an elephant, seek to identify what is in their hands. One man, holding the tail, declares the object is a rope; another touches the elephant's side and identifies it as a wall, and so on. The tusk becomes a spear, the trunk a snake, the leg a tree, and the ear a fan. The blind men argue. Each is partly right, and partly wrong, but none "grasps" the full animal." (Larsen and Kirk, 2005)

Larsen and Kirk state that caught in the complex dilemma of the "diverse dimensions of China's rapid emergence into the international, Great Power stage" are diplomats, companies and scholars, as well as members of the United States Congress as these individuals are "pulled in different directions by security, trade, and human rights considerations, Congress is caught in an intense debate over whether and when China should be seen as a threat or opportunity, a destabilizing force or a growing stakeholder in the international system. Most importantly, Congress must work with the President to decide how America should respond. Increasingly, members are appreciating that China's rise may be the most significant event in international affairs in the 21st century." (Larsen and Kirk, 2005)

The rate at which China has grown is almost inconceivable. In fact, "...between 1981 and 2001, more than 400 million people in China emerged from poverty." (Larsen and Kirk, 2005) One example of the 'rags-to-riches' stories in China is the example of "Mr. Liu Yonghao, for example. Mr. Liu is president of the New Hope Group, a Chinese company largely focused on animal feed production. In 1982, while working as a teacher in rural China, Mr. Liu launched a small family business. Though fraught with great personal entrepreneurial risk, Mr. Liu believed in his business so much that he quit his job, sold his watch, a bicycle, and some other personal items for U.S.$120, and took a plunge into the business world. Business was dicey for a time and, at one point, Mr. Liu was forced to jump into the Yangtze River in order to escape creditors who were hounding him. But he persevered and his business eventually took off. Today, Mr. Liu is one of the wealthiest private businessmen in China, worth more than $1 billion." (Larsen and Kirk, 2005)

III. VIEW of BusinessMEN in CHINA

The work of Ahearn (1998) entitled: "China's Economy: Findings of a Research Trip" states: "Most Hong Kong officials and businessmen with whom we met expressed confidence that Hong Kong's importance to China as a source of finance and services will continue to grow. Grounds for a more guarded assessment, however, became apparent based on the challenge Asia's financial crisis was posing for Hong Kong and China, and on Hong Kong's own growing internal problems. Thus, it appeared that the Hong Kong-China or "one country-two systems" arrangement remains delicate, subtle, and potentially vulnerable to stress..." (Ahearn, 1998) the effects on the rest of the world include: (1) positive; and (2) negative effects. Including: (1) shifts in world trade; (2) shifts in production; (3) shifts in the environment; (4) shifts in foreign relations; and (5) shifts in China's Communist and authoritarian form of governance." (Ahearn, 1998) it is reported to have been expressed by Chinese officials that the economic rate of China has averaged growth of 10% per year over the past two decades, making it the world's fastest growing economy. Fueled by massive inflows of foreign direct investment, rising exports, and one of the highest personal savings rates (around 40% of GNP) in the world, this exceptional economic performance has translated into a tripling of per capita incomes. A better material existence is apparent from the provision of food, clothing, and housing for the vast majority of China's 1.3 billion people to the widespread availability of basic consumer durables such as refrigerators, washing machines, and television sets for an increasingly large number of households.: China's growing prosperity was evident by explosive construction throughout the country (Shanghai reportedly has 20% of the world's high-rise construction cranes currently in operation) and by a proliferation of services such as restaurants, fashionable boutiques, movies, and discos in the cities. For the growing and increasingly consumer-oriented middle class, shopping and dressing fashionably is definitely "in." (Ahearn, 1998)

The businesses of China are managed by people who are friendly and hardworking and it a business community characterized by "purposeful activity and vitality." (Ahearn, 1998) Ahearn states: "Viewed from the large number of individual entrepreneurs providing hair-cuts, shoe shines, and bicycle repairs on the streets of Beijing, along with the omnipresent open-air food stands, it was clear that substantial numbers of Chinese are taking advantage of new opportunities to earn money "off" a growing market economy." (1998)

Ahearn (1998) relates that businessmen and officials in Hong Kong hold that the role of Hong Kong as "the major source of finance and services for the mainland would continue to grow in the future. They pointed to the successful transition to date, which has maintained Hong Kong's vitality and confidence, and to China's own obvious self-interest in maintaining Hong Kong as its "Golden Goose." At the same time, a case for a more guarded assessment became apparent based on the challenge Asia's financial crisis was posing for Hong Kong and China, as well as on Hong Kong's own growing internal problems."

IV. ECONOMIC STRATEGY of CHINA

Ahearn (1998) states that the growth of China has resulted in the creation of "...complex relationships with economic neighbors both near and far. Whether out of ignorance, malice, or ambivalence, certain steps taken -- or not taken -- by the Chinese government have created an unfair playing field in the world market. This is not meant to be a condemnation, but rather a realistic observation. Many forget that the mercantilist style of the early British economy emphasized protecting vulnerable industries and even reneging on international agreements in order to get ahead -- not exactly the classic Adam Smith model we now attribute to the Empire. In many ways we see a similar pattern unfolding in China: a rising economic hegemon that protects vulnerable industries, squeezes out competition, dismisses intellectual property rights in order to break foreign dependencies, undervalues its currency, and refuses to forcefully confront corruption and mismanagement. Yet, much like all developing nations, China is slowly coming to understand how such behavior, though beneficial in the short-term, leads to instability in the long run. Although still a long way from true free-market practices, the government is taking some important first steps." (Ahearn, 1998)

V. STUDY - ACCULTURATIONOF MANAGERS in GLOBAL MARKETPLACE the work of Boon and Tan (2002) entitled: "Impact of Industrialization on Acculturation of Managers in the Global Marketplace" reports a study that examined the "...impact of national environment on managerial value systems by comparing representative samples of Chinese managers in the United States, Singapore and the People's Republic of China." (Boon and Tan, 2002) it is related that two measures were used in this study: (1) dimensions of western measures (Machiavellianism, Dogmatism, Locus of Control, and Intolerance of Ambiguity); and (3) Eastern measures (Integration, Confucian dynamism, Human-heartedness and Moral Discipline). (Boon and Tan, 2002)

Boon and Tan states that Chinese managers in Singapore in this study were found "to display more common values with their counterparts in the U.S.A., while showing more dissimilar values with their PRC counterparts." (2002) it is stated that studies in relation to the affect of industrialization on the "personal value systems of managers in international business can be broadly categorized under three schools of thought" (Boon and Tan, 1998) Those three are the following:

1) One school which has as its emphasis cultural convergence "proposes that individuals in industrialized nations, through the imperatives of industrialization and economic development, will embrace common attitudes and behaviors despite cultural differences. This homogenizing effect can be observed in areas such as rationalism, secularism, and mechanical time. At the organizational level, there is greater similarity of structures such as complexity, formalization, centralization, and adoption of universal business practices, and this brings about a similarity in managerial values.

2) in the international arena, when emerging economies take on the free enterprise system of the west, they also adopt certain ideological values that are part of the free-market capitalism in the west. In this way, the western ways of engaging in business are exposed to these developing economies during industrialization, and thus the developing countries would assimilate ideologically driven values common to those held in the industrialized western countries; and 3) a third view, that of crossvergence, asserts that neither convergence nor divergence view is adequate to explain the dynamic interaction of economic ideology and national culture. It argues that the integration of cultural and economic ideological influences will result in a unique value system that is different from any of the original cultures. The crossvergence school claims that some new crossbred forms of values result when two cultures meet. Ralston et al. (1997) considered this as a continuum between the polar extremes of convergence and divergence, where an integration of cultural and ideological influences results in unique value systems that is different from the value set supported by either national culture or economic ideology." (Boon and Tan, 2002)

Boon and Tan states that when the People's Republic of China begin transforming the economy which was centrally planned to a market oriented economy in the 1970s the economic reform became the "turning point where the introduction and transfer of management know-how form foreign countries took place. The process of industrialization has led to revolutionary changes in institutional patterns as well as in peoples' values and attitudes). Although Chinese values have formed a clear and consistent system for generations this does not imply that the values and the system have not been changed. During the Cultural Revolution in PRC in the period from 1966-76, classical Chinese value system was disrupted at its basic foundation, the orthodox doctrine of Confucianism, was severely criticized and forbidden."(Boon and Tan, 2002) it is reported that studies on Chinese managers in various countries have resulted in results which are diverse "on the value systems of Chinese managers." (Boon and Tan, 2002) it is related that in a comparative study of "142 middle managers in departmental and retail stores in Singapore and 137 middle managers in Australia that findings show that "significant differences existed in work-related behavior and interpersonal relationships between the two countries." (Boon and Tan, 2002) Specifically stated were the following:

Singaporean Chinese managers were less satisfied with their jobs;

Singaporean Chinese experienced greater stress in their work situations; and Singaporean Chinese managers had poorer relationships with their superiors and peers than their Australian counterparts. (Boon and Tan, 2002)

Boon and Tan also relate a study reported in the work of Ralston et al. (1995) which made an examination of the "...apparent evolution in work values among the young Chinese managers in Shanghai a two-and-a-half-year period that spans the June 1989 Tiananmen Square incident. Findings suggest a growing spirit of Chinese style individualism and also provide some indication that these young Chinese managers are adopting more western ways of doing things. "(2002) Boon and Tan additionally relate that another area of research utilized the Chinese Value Survey (CVS) framework that the Chinese Culture Connection in 197 developed for the purpose of studying the personal values of Chinese managers.

Lee and Wahs' (1994) study on the relationship between Chinese values and organizational practices in Singapore supported the hypothesis that the four value factors from the CVS are significant integrative with organizational practices in Singapore. Particularly, human-heartedness values were significantly correlated to the managerial functions and business orientation in organizational practices. Moral discipline was significantly correlated to managerial functions as well as the human related approach in organizational practices in Singapore." (Boon and Tan, 2002) Boon and Tan state that a study conducted by Ralston et al. (1992) made comparison of the eastern values "across the U.S.A., Hong Kong, and PRC. The study found that three CVS dimensions -- integration, Confucian work dynamism and human heartedness -- discriminated among the groups." (2002)

Further reported by Boon and Tan is that Ralston et al. (1993a) in a comparative study on the impact of managerial values on decision-making between the United States and Hong Kong. Stated is: "Machiavellianism, Locus of control, Dogmatism, and the Intolerance of Ambiguity scales were used as measurement instruments. The sample consisted of 75 Hong Kong business students, 187 Hong Kong managers, 62 U.S. business students and 52 U.S. managers and Social Desirability scores have been used as a covariate to help control for cultural differences. Results show that differences exist to affect decision-making behavior and adaptations have to be made to accommodate the difference in values. Using the same data collected, together with scores on the eastern developed CVS, Ralston et al. (1993b) found that both culture and business environment interact to create a unique set of managerial values in a country." (2002)

Boon and Tan explain that the cultural values in the Peoples Republic of China are primarily rooted in the teaching of Confucius. The socialistic, legal and political systems of the PRC are "grown out of communist doctrine and the technological base is considered relatively underdeveloped. On the other hand, the environment in the U.S.A. is characterized as being individualistic, embracing optimal technological development, and a capitalistic business environment that evolved out of the English legal and political systems. Thus, PRC and USA represent ideological opposites in the work environment, in spite of the present move towards capitalism in PRC. They also represent cultural extremes in the sense of western and eastern beliefs, religious philosophies and social. As a result, the U.S.A. And PRC were deemed to be diametrically opposite. Singapore fitted well as the comparison group. Its socio-economic, political, and educational systems are more similar to that of the U.S.A., but being a Chinese-dominated society, the cultural heritage of its Chinese citizens, who are the majority in the nation, are similar, if not identical, to that of the PRC." (Boon and Tan, 2002) Stated as the hypotheses tested in the study of Boon and Tan (2002) are the following hypotheses: