Diligence China

US-China relations will probably not improve under the Democrats.  There’s a chance that they can become more strained and volatile.  It’s not about President Elect Barack Obama.  It’s House Speaker Nancy Pelosi you have to worry about. 

US-China Relations – Long Way To Fall

Sometimes those of us living in China are so close to the daily tensions and challenges of cross-cultural life that we miss the bigger picture.  The China-US relationship is one of the most successful in the world – one of the few true globalization success stories we have ever had.  Relations are better than “close” or “cordial” or “special”.  They are stable and professional.  Those are the ones that spell good business potential.

So yes – that means there’s a long way to fall.  The outgoing administration was so busy spreading the benefits of American enlightenment and prosperity around the world that they let relations with China develop intelligently, consistently and fairly.   Hopefully the incoming administration will be so busy cleaning up at home and abroad that they won’t have time to wreck relations with China for a while.  But if you Google Pelosi, China you will see what I mean. 

Going forward, trouble spots to watch for.

• Human rights will come back into the vocabulary.  The Republicans are rapacious and aggressive but the Democrats are self righteous and passive-aggressive.  They will trot out the State Department’s annual warnings about human rights abuses, religious oppression and freedom of speech issues.  Yes, they will eventually learn that Chinese people don’t really care about any of this.  No, it will not stop them. 
   
• General protectionism.  Democrat policy makers tend to lean towards more protectionist policies because they think its better for working households and unions.  Also, we’re in a downturn.  The good news – it’ll give you a ticking bomb to use in cross border business negotiations. (’I hear Pelosi wants to shut down ALL US-China trade by 2012. Let’s do this thing NOW.’)  The bad news?  Pelosi may really want to shut down all US-China business by 2012.
   
• Product quality and inspections.  If they target China specifically, and they almost certainly will in word if not deed, then it will lead to a nasty spate of bureaucratic recriminations.  Make sure all of your paperwork is in order and your China supply chain is bullet-proof.
   
• Immigration and visas.  Better, probably.  It can still be a hassle for Chinese to get into the US, but that has apparently been easing lately anyway.  If there are flare-ups on human rights or border issues, look for visas and immigration to become a hassle on both sides of the Pacific.  
   
• General engagement.  The big news here is that we will start using the word ‘engagement’ even more than we do now.  Aside from that, you can expect a fair bit of ambiguity and tension as Washington’s greater and lesser angels battle for influence.  Obama would probably like a strong, stable, strategic relationship with China.  Pelosi will have to get on board with the new program, because if she continues on the trajectory she has set for herself there could be problems ahead. 
   
• Competition from Mexico and Lat-Am.  Oil prices have come down and with demand this low no one is really thinking about expanding production and processing.  Still a long term trend, but probably not a big deal for most of this political administration.  Democrats may play the Mexico card in their bluster, but as long as oil is cheap this one is a non-starter.
    
• Media interest.  China is pleasantly boring these days.  Iraq, Afghanistan, Pakistan, Russia, mid-east – all big stories.  Lots of ‘how will Obama handle this, how will Obama handle that…” unless China’s economy does either really well or really badly, there are no pressing hot-button issues at the moment.  (In China, that’s a good thing.  Half the China headlines in 08 seemed to be natural disasters or product safety.)   The caveat here is that House Speaker Pelosi has the ability to turn an instant spotlight on China if she wants to. 

The odds are the Pelosi will moderate her anti-China rhetoric as other issues crowd the agenda.  President-Elect Obama barely referenced China during his entire campaign except for a few remarks about lost jobs.  Remember, the Democrats now run everything, so they’ll have to accept the responsibility if they undo the only decent thing the previous administration did right (or at least didn’t screw up miserably).  But the US-China relationship is entering a new phase.  We’ll have to keep on eye on the diplomatic side of things again.