Hello, China, Welcome to the Big Leagues

Posted on August 1st, 2007 in Politics by EngineerBoy

As China emerges onto the world stage as a budding economic and political near-superpower, the United States has a great big welcome waiting for them, kind of like this:

For those of you unfamiliar with the original source image above, that’s what happened to 26-year-old Robin Ventura when he charged the mound after the 46-year-old pitching legend Nolan Ryan plonked him. That photo catches one of six straight uppercuts to the head that the veteran Ryan delivered before somebody saved poor Robin Ventura. Ryan had announced his retirement and I’m sure that young, brave Sir Robin thought he’d teach the old man a lesson before he left. Nope, wasn’t gonna happen, kid. Ryan said he had perfected his headlock technique wrassling steers for branding at his ranch. That gave Ryan the kind of experience, poise, and confidence that the younger Ventura just couldn’t bring to the table.

And right now I think the same thing is happening to young, upstart China, courtesy of wiley veteran The United States of America. And the uppercuts are being delivered as problems with Chinese goods. Tainted toothpaste, toys with lead paint, defective tires, deadly pet food – the list seems endless, and it seems to grow monthly. And I don’t know about you, but all of this talk of substandard and dangerous Chinese goods seemed to have started happening fairly recently. Before that China was happily mass-producing crappy goods to fill all the Wal-Mart shelves in the US, with nary a peep about quality or safety.

But now, suddenly, scandal after scandal over defective and dangerous goods. And today a Chinese toy plant owner/manager committed suicide, presumably due to his humiliation over the recent toy recall. And a few weeks ago China executed the head of their FDA-counterpart for taking payoffs for drug approvals. None of this is building US consumer confidence in Chinese goods.

And, if looked at from a particular perspective, these events could be interpreted as a deliberate anti-marketing campaign. I mean, think about it…Chinese products are harming our children, killing our pets, causing car accidents, and poisoning people who clean their teeth. That describes the major points of most Americans’ daily morning routine. You get up, brush your teeth (and get poisoned), feed your dog (and poison him), have the kids put down their toys (off of which they’ve gnawed poisonous lead paint chips), then (if you’ve managed to survive long enough) drive them to school on your ready-to-fail Chinese tires. I predict the next two Chinese product scandals will be over breakfast cereal and coffee, which would give them 100% failure in the American morning routine.
When I apply the sniff test to all of these incidents, they come up smelling like something other than random occurrences. Somebody, somewhere is making these things happen publicly at this point in time. I doubt it’s the Chinese trying to committ some kind of geopolitical suicide. I don’t think Russia or any other nation has the resources or skill to create and exploit incidents of this magnitude. That leaves the good old US of A with the motive, means, and opportunity.

Why, exactly, would we do this to China? Let me take you back 25 years, to the rise of Japan in the 80’s. Everything was turning Japanese in the 80’s. They were mass-producing virtually all consumer electronics, buying all of the US real estate, buying up our movie studios, taking over our businesses, buying Senators and even a President (Reagan) with their massive wealth and power. Everyone was told to get ready for the rise of Japan as the new leader of the world, with the US becoming their Britain-ic lapdog. Popular movies like Blade Runner (1982) and Rising Sun (1993) had major themes that Japan would take over and set the tone for the world, not the United States.
In retrospect it seems silly that we were worried, since Japan is now such a harmless and trusted partner of the US, but back then all savvy, up-and-coming MBAs were learning Japanese, embracing sushi, and honing their golf games for the inevitable dealmaking on the links with our new Senpai.

But something happened to Japan. They over-leveraged themselves with investments and real estate, overpayed in artificially inflated markets, and then didn’t have the economic mass to survive the collapse of their real estate and financial markets. I have my doubts that the fall of Japan was a naturally-occurring market correction. Instead, my theory has always been that the US judo-ed Japan by making our real estate, entertainment, and industrial properties very attractive, artifically inflating the prices, and then ever so subtly using their economic momentum against them. I’m no economist, I don’t play one on TV, and I didn’t stay and a Holiday Inn Express last night, but that explanation has always rung true to me.

And it also rings true that it cannot be complete coincidence that a series of horrific Chinese product failures would occur so close together and all hit areas that are part and the heart and soul of America – our kids, our pets, our cars, and ourselves. I mean, what are the odds? Project yourself 20 years into the future and look back over these last few months and apply Occam’s Razor. Would you really think that these were naturally occurring events and revelations that coincidentally all happened in such a short time span and hit such near-and-dear areas of the American economy? I wouldn’t. Instead, to me, these events have all the hallmarks of a Machiavellian program by the United States directed against the economy of the Chinese state.

Now, I’m not saying that the US directly *caused* all of these product scandals. That probably didn’t happen – I mean, I can’t see the US poisoning dog food on the sly then blaming China. Maybe, but doubtful. I also don’t think the US is simply fabricating the issues – too easy to fight back against false charges. No, the two most likely scenarios I can think of are that either the US is *indirectly* involved, such as by developing a network of contacts that are alerting us to existing issues. I give this one about a 40% chance of being the case. The other likely scenario, in my opinion, is that problems with Chinese goods are ubiquitous, kind of like offensive holding on a given football play, and the US is simply “discovering” the issues in ways that are most strategically harmful to China. I give this one a 60% chance of being the case.

And why would we do this? Well, I think that part is obvious. We don’t want to (and probably can’t) simply invade China like some wayward oil state. We also don’t want them to get up so much economic momentum that we can’t exert some kind of control. And with the US being their major market, poisoning the attitudes of everyday Americans against Chinese goods is a great way to show China that we control their purse strings, ultimately. Even with a billion citizens, the Chinese economy goes nowhere without international trade.

And so the US is using a little of the tactics of the old mobster-run unions in the United States. The factory owner or shipping company suddenly finds themselves faced with sick-outs, labor troubles, unexplained equipment failure, missing goods, and spotty work quality. Then they get a visit from the union rep, expressing sympathy for their plight, and intimating that if the owners would just play ball, maybe all these troubles might just…disappear…capiche? And in most cases the math works out so that it makes more sense to play ball than to fight back, particular against an enemy with superior firepower and resources.

And so I predict that in the next 12-18 months the US and China will come to some kind of terms for China’s entry into and position on the world economic and superpower stage. It will all be couched in the language of diplomacy and may seem completely unrelated to these recent product scandals. But in the back rooms and between the lines the message will be clear. The US will make China an offer it can’t refuse. And China will accept it…or remain a frustrated backwater.

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