US retail giant Costco on Tuesday opened its maiden store in Shanghai in defiance of US officials’ call for companies to leave China. The move in the opposite direction revealed the simple reality Washington fails to understand that decoupling the US from the Chinese market is not an option.
US officials’ call for decoupling from China has already raised questions and opposition from stakeholders, including US businesses.
"Trump may be frustrated with China, but the answer isn't for US companies to ignore a market with 1.4 billion consumers," Myron Brilliant, executive vice president of the US Chamber of Commerce, said in a statement last Friday.
As each other's major trading partners, American business is deeply intertwined with China. Trade with China helps each US family save 850 dollars per year, according to China's Ministry of Commerce.
China has considerable advantages worldwide in terms of the scale of the supply chain, the number of skilled workers, the infrastructure to move things around quickly, or the relatively cheap labor pool.
The New York Times reported in January this year that when Apple began making its Mac Pro computers in Texas, it struggled to find enough screws. After months of delay, Apple ended up ordering the screws from China.
Deliberately "decoupling" the two is bound to threaten the global supply chain, which eventually means more costs on American businesses and consumers.
In addition, the huge potential in the Chinese market and its rising middle class with considerable spending power is just too big to ignore. Costco is not the only US business to see that and will certainly not be the last.
According to consultancy Rhodium Group, investments by US companies in China have grown this year despite the ongoing trade tensions.
American investors pumped $6.8 billion in China in the first half of 2019, up 1.5 percent from the average of the same period in the past two years.
Most of the investment went into projects related to green finance, such as electric vehicle maker Tesla’s factory in Shanghai. Other large deals included US fund Bain Capital's $570 million investment in Beijing Qinhuai Technology.
Investment were not just coming from the US as the overall foreign direct investment into China amounted to $75.6 billion, up 7.3 percent in the first seven months of 2019 compared to the same period last year, according to data from China's Ministry of Commerce.
Most economists and trade experts see decoupling as “sheer fantasy”, according to an analysis published on Foreign Policy, an American news publication, on August 23.
The article pointed out, “In seeking to decouple the United States from China, Trump will succeed at only one thing: Decoupling the United States from the global economy. And that will mean a long-term future of being outcompeted and impoverished—by Europe, Japan, and ultimately China as well.”