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Suspect Chinese policies

Spencer KimballSeptember 23, 2015

Many Americans are suspicious of China's trade policies. Millions of manufacturing jobs have been outsourced. But could Chinese investment create new opportunities for US workers? Spencer Kimball reports from Chicago.

Symbolbild USA China Beziehungen Hacking
Image: Reuters/H. Kang

When President Barack Obama and Chinese President Xi Jinping meet at the White House this week, security issues are expected to feature prominently on their agenda. But US-China trade ties weigh more heavily on the minds of most Americans.

According to the Pew Research Center, 54 percent of Americans have a negative view of China. Sixty percent of those surveyed considered job losses to China a "very serious problem." The amount of US debt held by Beijing was viewed as "very serious" by 67 percent of respondents.

Between 2001 and 2013, the US lost 3.2 million jobs due to its trade deficit with China, according to the left-leaning Economic Policy Institute (EPI). About two-thirds of those jobs were lost in the manufacturing sector. The electronics industry was hit particularly hard.

"It's sadly a co-dependent relationship that's not good for either trading partner," Robert Scott, an expert on international trade and manufacturing at EPI, told DW. "The people who win are large multinational companies in the US and in China. They win from the accumulation of large profits."

Chinese export strategy

During that same period, the US trade deficit with China ballooned from $84.1 billion (75 billion euros) to $324.2 billion (290 billion euros). Washington has long accused Beijing of keeping the value of its currency artificially low, making its exports cheaper and undercutting American manufacturers.

USA Xi Jinping in Seattle
Chinese President Xi Jinping spoke at a governors forum in SeattleImage: picture-alliance/dpa/J. McHugh

"It's due to the strategy pursued by the Chinese government," Siva Yam, president of the US-China Chamber of Commerce, told DW. "The strategy is to build an economy on exports, and America is always the ultimate export market."

According to Scott, China's large trade surplus helped finance the US construction and housing bubble that burst in 2008, triggering the global financial crisis. The US is still struggling to recover from its worst economic crisis since the Great Depression in the 1930s.

"Where we have had growth in the economy has been in low-wage sectors like restaurants, retail trade, and some of them in the bottom end of the health care field," said Scott. "That's why wages and incomes are way down in this recovery."

Man vs. machine

China is now creating some jobs in the US, according to a study by the National Committee on US-China relations and the Rhodium Group. Between 2000 and 2014, Chinese companies spent $46 billion on foreign direct investment in the US, most of it over the past five years. The money primarily went toward acquiring American companies.

Chinese affiliated companies now employ 80,000 Americans compared to just 15,000 five years ago. Illinois, North Carolina, Texas and Virginia have been the largest beneficiaries. According to Yam, manufacturing in the US has become attractive again as efficiency has increased through automation. But automation means most of the jobs lost to outsourcing won't return with the factories.

China Flugzeug Boeing
US plane maker Boeing is considering a production facility in ChinaImage: picture-alliance/dpa/ Z. Shuai

"When the United States had the financial crisis, a lot of manufacturing companies found out that the same amount of work done by 10 people could be handled by eight people," Yam said.

'Lose-lose strategy'

Now, China's economy is facing trouble. Growth has slowed, throwing global financial markets into uncertainty. As costs rise, Chinese workers are also facing the problem of outsourcing. Manufacturing is moving to lower wage countries, like Cambodia and Vietnam, as it once moved from the US to China.

According to Scott, the wages of Chinese workers also haven't risen adequately. Much of the windfall from Beijing's trade surpluses have gone to multinational companies and Chinese state enterprises, contributing to the trend of rising income inequality.

"This is a lose-lose strategy for working people around the world," Scott said. "It's really resulted in a massive re-distribution of wealth."