On December 7, Thomas Hout of Boston Consulting Group and a visiting Professor at the University of Hong Kong joined us in Irvine Auditorium to discuss his economic view of the U.S.-China relationship. Hout co-authored several books and articles, including a business bestseller called, Competing Against Time. With essays and articles published in Foreign Affairs and Harvard Business Review, Hout has a range of expertise in Strategy and Operations with a regional focus on Asia.
Although the event was titled “Is the U.S. in an Economic Cold War with China,” Hout started off by saying that the term “cold war” is not the best way to describe the conflict. Instead, he prefers the term “strategic competitor.”
To briefly sum up the conflict, China is amassing large stakes in U.S. Treasury Bills, acquiring significant stakes in resources abroad, with tight capital controls. Meanwhile, the U.S. has been crying foul over an overvalued Yuan, which keeps Chinese products cheap. On a consumer level, the U.S. has a problem of over consumption while China doesn’t consume enough.
Hout explained that the economies of both the U.S. and China are structurally prone to conflict by simple comparison. Considering cultural, political, and economic positions, we are experiencing a major geopolitical shift in paradigms from U.S. hegemony to a shared system. While some may argue that the U.S. military is unrivalled, from an economic perspective, China is experiencing phenomenal growth with high rates of savings and investment. Conversely, the U.S. is experiencing lower growth with high rates of consumption, and lower savings.
Rather than continuing unconstructive rhetoric like that of politicians and pundits, Hout encourages cooperation between these two radically different systems as we navigate this complex relationship.
I found this dialogue particularly interesting considering my three-year stay in China. As a student of Chinese both at Middlebury’s Summer Language School and at MIIS, many of my courses discussed whether the U.S.-China relationship is one of strategic partnership, or competition. This shared belief that both sides are thwarting each other’s growth ultimately leads to a lack of trust, and further weakens this critical relationship. Ultimately, easing capital controls in China and letting the Chinese Yuan appreciate will help solve financial and trade problems on both sides of the Pacific. This can only be achieved through a strategic partnership.