Time for the United States to Learn from China

The United States has spent over thirty years trying to “teach” China with, at best, mixed results. I think the time is well overdue for a turnabout in roles. We need to start learning from China.

I have been thinking about this issue for a long time, but reading Michael Dunne’s terrific new book American Wheels Chinese Roads: The Story of General Motors in China, has convinced me that we can’t wait any longer. While not the central theme of Dunne’s book, it is an important concluding thought. Dunne underscores what I think should be the strategy for the United States as we anticipate a wave of Chinese capital flowing into the United States, and it boils down to taking a page from the Chinese playbook.

1) If the Chinese want to do business here, they have to invest in manufacturing and jobs.

2) If a Chinese industry requires joint ventures for our firms to do business in China, then we require the same when that business comes calling here.

3) “Profits from operations stay inside the United States. Repatriation to China will be limited and will require approvals from the U.S. government…it’s just quid pro quid.”

For most of the book, Dunne leads up to this point with a fascinating story about GM’s adventures in China. He does what a lot of business books on China do—albeit in an entertaining way that only a few rival (Mr. China and Poorly Made in China come to mind in this vein): He helps us  understand what it takes to make money in China. First off, you need nerves of steel. Dunne tells a very entertaining story right up front about Peter Badore, who negotiated on behalf of Chrysler. Badore would routinely arrive two days before his meetings to get adjusted to the time change in order to take away the advantage the Chinese had come to expect from Americans who were disoriented by the day to night transition. Badore defied all logic by talking non-stop for hours on end until the Chinese finally called uncle and gave in to his demands.  You also need a license, relationships, persistence, and an understanding of how Chinese culture and preferences differ from those in America.  For example, as Dunne discusses, over time, GM reworked its Buick to adjust for the fact that the Chinese like big cars but small engines that don’t guzzle gas.  They don’t care nearly as much as Americans about passing or getting a fast start off a stoplight.

Dunne’s book is worth reading for an inside scoop on an American company’s successes and travails in China, but the real value comes with his implicit warning:  The United States has a very slim window of opportunity to get our policy on Chinese investment right. If we don’t play tough up front, we will quickly be out of the game.