Does corporate America kowtow to China?

China’s rise as a manufacturing power has benefited American factory owners in at least one way. The U.S. trade shortfall with China hit a record high $273 billion last year and government data shows some 40 percent of factories with more than 250 employees closed down from 2001 to 2010. While it can’t all be laid at China’s door, it is not a coincidence that after decades of more gradual decline, U.S. manufacturing took a nose dive after China’s entry into the WTO.

Cheap labor is one huge advantage for China, of course. But numerous academics, former trade officials and labor union officials say predatory trade practices, subsidized exports and other controversial economic policies also make Chinese companies tough to compete against. And they warn that unless the U.S. works out a way to bolster and promote the sector, future prosperity and America’s superpower status will eventually be at risk. This is only underlined by the U.S. economy’s fragile state, with the jobless rate at 8.8 percent, growth tepid, and a huge government budget deficit and debt burden.

Even China’s rising production costs may present an increasing threat, they argue. It means that China will be less able to rely on being the cheap maker of textiles, toys, furniture and plastics to create jobs — some of that production is increasingly going to go to places like Bangladesh and Vietnam. Instead, Beijing is increasingly focused on moving up the chain to higher valued technology-based goods — which puts it in direct competition with the remaining power base of the U.S.
manufacturing sector. And the technology-transfer terms that many big American companies are agreeing to when they do deals in China, and the research centers they are opening up there, means they could in some cases be signing their own death warrants.

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