The China Syndrome

The China SyndromTo the ham-lovers of Smithfield, Virginia, it is American weakness that explains why Chinese tycoons may soon own the giant pork producer that dominates their home town.

Local hams, made from peanut-fed pigs and then hickory-smoked, first earned fame in colonial times. In Smithfield images of hogs vie with American flags as a badge of pride, adorning shop fronts, school sports kit and the town water tower.

Yet if a multi-billion-dollar takeover goes ahead, Smithfield Foods – the world’s largest pork processor, based in the town – will become a subsidiary of a Chinese butcher, Shuanghui International.

News of the bid broke shortly before a summit between the American and Chinese presidents in California, set for June 7th and 8th. If approved, it will mark China’s largest investment in America, and more will surely follow.

That raises questions about relative economic power, and about who holds the upper hand as the two rivals embark on a new stage of interdependence. That interdependence is all the more remarkable because it co-exists with knotty economic disputes about market opening and cyber theft of trade secrets – not to mention philosophical differences about democracy and the rule of law.

In Smithfield, specific questions about China’s rise and intentions could hardly be more urgent: Smithfield Foods is by far the largest employer. But on a muggy recent morning on Main Street, China’s intentions were not mentioned much.

Instead, stunned locals talked about their American bosses. The company has vowed that jobs are safe. How can managers promise anything, townsfolk scoffed, after selling out to foreigners? The nature of those foreigners was not much discussed.

The talk was instead of sadness at seeing an American firm falling to outsiders. A woman suggested it was a moment for soul-searching. In the Bible, she advised, Isaiah says that foreigners will take over the lands of those who fail to serve God. Given the Chinese takeover, Americans were “evidently” falling short.

China needs cleaner food and America needs global markets

Nobody predicted strikes or called on the government to declare ham (like French yogurt) a strategic industry. There was a mood of resignation. Some endeavored to sound cheery. The deal seems a sound one, ventured the mayor, Carter Williams: China needs cleaner food and America needs global markets. With luck Smithfield will have to build a new factory as exports to China boom. In any case, the mayor added, there is not a thing in the world that we can do about it.

If Mr Williams’s realism is admirable, some other Americans tend towards excessive gloom. A 2012 survey on global attitudes by the Pew Research Centre found Americans almost evenly divided on the question of whether China or America was now the world’s economic leader. Chinese respondents were much more likely to say (correctly) that America is still top dog. Among Barack Obama’s foreign-policy and economic aides, sources report “mystification” that so many Americans think that China is now richer.

The government has, at times, attempted to push back against such pessimism. The vice-president, Joe Biden, gave a chin-jutting speech to students in Chengdu in 2011 in which he hailed America as still “the wealthiest nation in the history of the world”, with an education system and society set up to promote creativity and innovation (ie, unlike some he could mention).

The CEO of Smithfield Foods, Larry Pope, puts forward a similarly confident argument about his own enterprise. America is world-beating when it comes to producing good pork efficiently, he argues. His new Chinese partners want to feed their people, not take over the world. Nonetheless, he worries that Americans are scared of China.

He may be putting it too strongly. Americans, though far more mindful of China than Europeans are, have not had a “Japan moment”, suddenly waking up to a newly brash bully next door. They have not even had a “Sputnik moment”, when some piece of Chinese technological wizardry has shown up the United States as second-best and China as top nation.

Policymakers in Washington worry more with each passing year about China’s military power. But polling shows the American public rather unfussed by it. In short, much American grumbling about China seems really to be about something different.

The perils of parochialism

Often “China” is an avatar for globalization. For many on the left, it stands for the supposed greed of American bosses who consciously choose to ship jobs elsewhere, rather than stand by their workers. Mr Obama has told aides that for most Americans, “China” stands for lost jobs, especially in manufacturing.

In his first term, the president repeatedly sought a China policy that might help reclaim millions of jobs by prodding companies to keep or create positions in America. No such magical China policy exists, as Mr Obama has tacitly acknowledged by pragmatically pursuing economic engagement.

Republicans on the other hand, when polled, most powerfully associate the “China” threat with America’s public debts. They accuse Mr Obama of buying the votes of the feckless poor with welfare and other gifts, running up debts that leave America at the mercy of foreign creditors.

In these cases, political debates about China resemble the discussions on Smithfield’s Main Street: they are mostly arguments about America and its perceived internal weaknesses. Chinese politicians play a similar game in reverse, sometimes using a hard-to-recognize caricature of “America” as an all-purpose test of China’s development and resolution.

But if the two geopolitical rivals are to co-exist, as they must, they need to get beyond caricatures and self-absorption and strive to understand each other. They have grown too big, and too close, to try anything else.

Source: The Economist – The China Syndrome

Categories: Food and Beverage, Trade & Investment

Tags: , , , , , ,

3 replies

  1. Thank you for the link.

    You speak of the “mystification” Barack Obama’s foreign-policy and economic aides, the fact that so many Americans think that China is now richer. What even the most ignorant American recognize is that China has momentum and ruthless discipline at the top. Americans can also see that we are being lead by a disorderly mob of thieves. Such leadership does not breed confidence.

    Anybody who has China for an employer can be rightly frightened. What China represents is a worst case of crony capitalism than what we find in the United States. And crony capitalism is what the administration of President Barack Obama is all about. Fortunately, in the United States, power is still dispersed. In China, far fewer hands control the levers.

    Our problem is the direction of “change.” When America was founded, when a man gave his word, if that man was a Christian, that man’s neighbors expected him to keep his word. Yet here we have the executives of Smithfield Foods promising what someone else will do. How can anybody keep someone else’s word? They cannot, of course.

    In the short term, the executives of Shuanghui International will probably not abuse the current employees of Smithfield Ham. In the long term, nobody knows. We just know what the leadership of China has been doing to its own people, and it is not pretty.



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