Written by 09:36 Business

The Business Ties That Bind the U.S. and China Are Strong but Fraying

If you follow the news, you know that tensions between the United States and China are high and that the commercial relationship between the two biggest trading nations on the planet has been fraying.

Yet, amid the ominous headlines about a possible “decoupling” of the United States and China, you may be surprised by how strong and binding their financial ties remain.

Many big U.S. companies depend on China for a substantial part of their income and rely on Chinese suppliers and factories for their products. The two economies are closely linked, and, as an old China hand, I think that’s a good thing. It implies that even if relations deteriorate further, the countries have many incentives for pulling back from the brink of serious conflict.

Consider that while the publicly traded U.S. companies in the S&P 500 obtain almost 60 percent of their revenue domestically, the biggest source of their foreign sales is China. That’s according to estimates from the financial data company FactSet, which said sales from China amounted to 7.1 percent of S&P 500 revenues for the 12 months through December. The second-largest foreign source was Japan, with 2.6 percent; followed by Germany and Britain, with 2.2 percent each; and then Taiwan, with 1.8 percent.

Numbers like these are critical in assessing U.S.-China relations, Dale Copeland, a political scientist at the University of Virginia, said in an interview. “Expectations of future profits are a key and often neglected factor in international relations,” he said. Mr. Copeland is the author of “A World Safe for Commerce: American Foreign Policy From the Revolution to the Rise of China.”

“History shows that when a major power cuts off business and resources abruptly — so that prospects for future commerce look dim — the possibility of war becomes much greater,” he added. “Fortunately, that hasn’t happened so far with the United States and China. Greater conflict, even war — aren’t inevitable. There are still plenty of opportunities for future business and, I think, that is, and should be, a deliberate part of current U.S. policy.”


Last modified: 29 May 2024