China and moving up the value ladder

In 1949, the Chinese Communist Party took control and the People's Republic of China was born. Since then, PRC (aka China) has been under Communist control and if we brand communism as being authoritarian, then China has also been under authoritarian rule.

In the 1970s, the United States decided to recognize China instead of Taiwan, even though China was still a communist state under authoritarian rule. This was because the United States saw the geopolitical advantage of having China on the U.S. side during the Cold War against the USSR. Realism trumped idealism.

In the 1980s, as China gradually opened its economy to the rest of the world, the United States supported China's economic development. China was able to provide a cheap source of labour, allowing U.S. companies to produce cheaper and maximise profits. Nothing changed in China's domestic system, though; it was still a communist state under authoritarian rule. But once again, pragmatism (who can deny money) trumped idealism.

Personally, I think the United States had been friendly to China in the past because it did not see China as being strong enough to threaten the United States economically or politically. China was too far down the value chain back then to be a threat. The United States could happily exploit cheap Chinese labour while staying much further up the value chain to reap in the benefits. It is like the colonial days, when cotton was grown in colonies while clothes were made in England.

But enter the 2000s, and China started to climb up the value chain. In the 2010s, China has gone even further up the value chain to be able to provide its own alternatives in lower-end markets. The best smart phones costing US$1,000 are still products of U.S. companies, but Chinese companies are able to cover the lower-end markets of cheap smart phones costing US$100 or so. Chinese companies are making cheap cars too. These might not be top-of-the-line luxury vehicles, but they serve their purpose for the average Joe.

As we enter the 2020s, China continues to climb the value ladder, and is now a leader in 5G technology. Chinese companies are producing products that can seriously rival some of the leading U.S. companies.

And as China climbs the value ladder, we also see a change in U.S. attitude toward China. China has remained under communist and authoritarian rule for the past 50 years (actually, more than that, since 1949), but the United States has chosen to avoid this issue when China was further down the value ladder. When China was not an economic or political threat, being communist or authoritarian was not an issue for business. People were happy to exploit China's cheap labour if it helped maximise their profits.

But when the rise of Chinese companies up the value ladder started to threaten their profits, suddenly, being communist and authoritarian is a "thing". We start to hear people say things like "Can we trust China?" Remember, trust in China has not been an issue in the 1980s and 1990s when U.S., European, and Japanese companies were happily exploiting cheap Chinese labour. Even the Tiananmen Square incident did not stop the United States from giving China most-favored nation status.

I think people need to be aware that, when viewed objectively, mistrust in China stems not from its communist government and authoritarian actions. Casting China in an unfavourable, shady light using communism and authoritarian rule is the means; the underlying reason is more because the rise of China threatens U.S. economic well-being.

To me, this is very short-sighted and petty on the side of the United States. Rather than see competition as something that needs to be put down (which is basically how the United States does things, whether government or private sector), competition should be viewed as something to spur innovation and progress. Competition should make us want to do better than the other side, not get rid of it.

Let's not stoke mistrust just because the other side is different from us. That is discrimination. Instead, we should look within ourselves to see how we can do even better than the other side. That is friendly competition, and that is how we can all move forward toward progress as a human race. Whether we like it or not, we are a single human race living on our single planet Earth. A bigger and more accepting view of human progress will help us more in the long-term than short-term narrow views of national dominance.