As the cheerful images of Prime Minister Narendra Modi’s arrival in the US dominate the Indian news cycles, there is a slightly overlooked pattern here. While there is bipartisan political consensus on countering Beijing in both India and the US, the American business class has still not fully decoupled from China. Soon after landing, Modi met an exceptionally impressive list of Americans in New York. But let’s narrow it down to two of them: Elon Musk and Ray Dalio. One is the owner of Tesla and Twitter, while the other is the founder of Bridgewater Associates, the world’s largest hedge fund. Other than being celebrity billionaire executives, what’s common between the two of them?
As the US-China relations nosedived over the past five years – starting with the 2018 trade war – Dalio has been the most consistent bullish executive voice in the US. Meanwhile, as the decoupling narrative really intensified in the past couple of years, Musk has been the most vocal in stressing how his company and its productive capacity are highly dependent on China. This was evident during Musk’s recent visit to China and the red-carpet treatment he received there.
This tells us about an emerging story. There is an increasing difference between how the US policymakers look at China and how its business leaders, who are deeply invested in it, do. Multinational firms with a large presence in China still consider it vital for their interests. As the gulf between the US political and business class’s preferences over China continues to grow, it is bound to have profound consequences for India. While the interests of the Indian policymakers have been consistently converging with the US’ decision-makers, it is the American multinational businesses that are vital for India’s future developmental plans.
Also read: Xi-Blinken peace is fragile and won’t last
A flurry of visits
The US-China relations hit rock-bottom following the spy balloon incident in February this year. US Secretary of State Antony Blinken was forced to cancel his trip to China, which, to begin with, was meant to lower the rising temperature in the bilateral relationship. Finally, Blinken managed to make his way to China earlier this week. During these past few months, a series of key US and other important Western executives also visited China, especially after the country finally eased post-Covid travel restrictions in March.
Some of these names include Apple CEO Tim Cook, JPMorgan Chase CEO Jamie Dimon, General Motors CEO Mary Barra, Blackstone Group CEO Stephen Schwarzman, and Musk. These aren’t just routine American executives, rather their respective corporation has structural significance for the US economy. Cook’s Apple is considered the crown jewel of the US tech sector, and it is the most valuable company in the world. JP Morgan is not just the largest bank in the US, but also has significant control over the US treasuries market. Blackstone is one of the largest private equity firms in the world. General Motors is the largest automaker in the US.
Another executive who was expected to visit China, but ended up cancelling at the last minute, was Nvidia’s founder Jensen Huang. His chipmaking company is at the forefront of the generative AI revolution – aka ChatGPT et al. He recently remarked on how vital the Chinese market was for his firm.
However, the US executive to receive the warmest welcome in China was the founder of Microsoft, Bill Gates. He was the only one who had a one-on-one meeting with President Xi Jinping. And Xi reportedly referred to him as his “old friend”.
The growing schism
These flurry of visits by business leaders hailing from the top-most echelons of the US capitalist empire reflect two things. On the one hand, multinational firms with large Chinese exposure are increasingly worried about the growing “decoupling” or “de-risking” narrative. On the other hand, the interests of these business leaders wildly diverge from that of the US political class, who increasingly look at China as an existential threat. Some of these hawkish conceptions of the US-China relationship are also reflected in the workings of the US House Select Committee on the Chinese Communist Party (CCP).
Some of these tensions between the views of politicians and businesses on China are now playing out in the open. For instance, Marco Rubio, a prominent Senator from Florida, recently remarked, “[US businesses are] making so much money off their investments, their factories and their engagement there now that they lobby here for free on China’s behalf.” More recently, four members from the Select Committee on China visited Detroit to convince US automakers – Ford and General Motors – to drastically cut their supply chain dependence on China.
On their part, the US executives are concerned about the intensification of US-China rivalry, and how it’s playing out in the economic sphere through repeated calls for decoupling or de-risking. A recent survey of US multinational companies’ CEOs by The Conference Board shows that when looking at China as an industrial base, 44 per cent think that China retains its position, 33 per cent say it is weakening, and only 24 per cent say that it has been improving. While there is growing reluctance about China, it is hard to miss how two-thirds of these CEOs still consider China a key nugget of their business strategies.
Rhetoric vs reality
While there has been increasing political chatter about decoupling in recent years, the global economy’s underlying realities don’t necessarily reflect it. Research by World Bank’s Aaditya Mattoo shows an interesting emerging pattern. First, East and Southeast Asian countries have been exporting more to the US in the past few years. This can be attributed to the decline in US imports from China – particularly for goods that are still subject to 7.5 and 25 per cent tariffs. Second, these economies in East and Southeast Asia have also experienced an increase in their imports from China during the same period.
Simply put, the whole decoupling saga has moved the assembly of goods out of China to some degree. However, China continues to provide a large part of the inputs required to produce these goods. In other words, has the West or the global economy’s reliance on China really gone away?
Also read: Education, language, politics — Xi Jinping wants Central Asia to depend on China, not Russia
Alliance India can’t ignore
US policymakers rightly contend that China’s unfair and non-market practices have resulted in deep economic problems for America. The global economy has been facing a profound imbalance over the past four decades, which has been reflected in China’s staggering trade surplus and US’ equally staggering trade deficit.
The issue here is that an alliance between US’ corporate interests and the Chinese government and firms is responsible for this deep imbalance. Over time, as several other Asian countries industrialised and joined the production bandwagon, their governments and firms also became a part of this alliance. Today, they are all knit together through expansive supply chains that run across Asia and account for nearly 70 per cent of global exports. And as the largest provider of inputs and final goods, China is like the lynchpin of “Factory Asia”.
Over and over again, Indian policymakers have stressed that India needs to rapidly integrate with these supply chains in order to develop its industrial capacity. And there have been some early successes in the form of electronics assembly in the country. But for sustained industrial gains, India would need to embrace this alliance. They would often lobby together for their joint interests and aim to defy geopolitical objectives.
As India industrialises, it is only natural that a large part of its inputs would come from China. This would happen as New Delhi’s strategic tensions with Beijing would continue to intensify. India’s road to prosperity would move through this route of complex interdependence.
Srijan Shukla studies international politics and business at New York University (NYU) and is managing editor of NYU’s Journal of Political Inquiry. He tweets @srijshukla. Views are personal.
(Edited by Ratan Priya)