Trade War? Hardly.IB
It must be an election year; the anti-China rhetoric has been hot lately. Every day there’s a new story out about how the Chinese are stealing our jobs, screwing our companies, etc.; and how we are on the verge of a trade war with them. As if for the past decade China hasn’t been stealing our jobs and screwing our companies.
The idea of a trade war breaking out is silly though, because we’ve already lost.
No hard feelings, this is just how it works with China: foreign companies play against a stacked deck and loaded dice. Complaining about it won’t do anything. The WTO and others may make threats and issue rulings, but the Chinese will just ignore them. In the name of “getting a piece of the Chinese market” we all just accept it with a smile on our face, lest we upset our chances at having a piece of “the biggest market in the world”.
This idea is complete nonsense because there is no way the Chinese government would ever allow a foreign company to earn a significant share of the domestic market. It’s not just because of the communist government trying to further its own relevance and existence. Historically things have not gone well for China when foreigners come to play (read about late imperial China to get an idea of what I am talking about), so it’s completely understandable that the Chinese have a slight aversion to foreign influences.
The Chinese government is absolutely going out of its way to exclude foreign competition from the domestic market. It is trying to protect its own companies just long enough so that by the time the restrictions on foreign companies are lifted to allow them to realistically compete, the game is over because in the time that the regulatory restrictions were in place, the Chinese companies have been building their own businesses to the point that it even with no regulatory restrictions, it has become excruciatingly hard for the foreign company to effectively compete in the market.
Are the Chinese going to keep doing it? Absolutely. Should our response be toothless threats of embargos and tariffs, and whining to the WTO? Absolutely not. Instead let’s just accept that for various reasons the Chinese don’t think they have to play by the rules. No embargos, no tariffs, no whining to the WTO. Just let them pull whatever crap they want to pull.
Companies should reassess if they actually believe they can “get a good piece of the Chinese market”. Is China really that important of a market? What would happen if all the foreign companies collectively decided not to sell their cars, machines, purses, and whatnot in China?