China's Economy and the Future of American Fear

Why a slow-down in manufacturing, and the rise of other developing nations, could mean big changes in U.S. attitudes

RTR36HY3-615.jpgCarlos Barria/Reuters

Earlier this week, President Obama and Mitt Romney took turns needling China in front of large Ohio crowds. The two campaigns are running back-to-back television ads in the state, each trying to out-bluster the other on being "tough" on China. As our own Molly Ball writes, the attacks work -- largely because they appeal to middle-American concerns over outsourcing and competition.

Both men might want to pull their punches while they can. Although China is still the world's workshop, rising wages means that many companies are beginning to shift their operations to even lower-cost environments like Vietnam, Cambodia, and other areas where labor is plentiful -- and cheap. Foxconn, the technology contractor with a Western reputation for draconian workplace practices, plans to invest $12 billion in new Brazilian factories.

Beyond the increasing price of labor, recent changes to Chinese tax law have cut back on incentives to foreign investors, even as Vietnam has begun to respond in the opposite fashion. This has led one Taiwanese company to consider relocating:

Wang, of JoyFly Technology, says he has just returned from a research trip to Vietnam, where he found that factory land in the south could be leased for 30 percent less than in China's Pearl River Delta, the export hub close to Hong Kong. "Of course, Vietnam's roads are nowhere near as good as China's and there are often power cuts," he admits.

If the current trends continue -- and together with the prospect of a long-term slowing of China's economy, people like Wang will only become more common -- it's not hard to imagine a world where the big, bad country that stole America's jobs is no longer China. Instead, it'll be wherever those Chinese jobs went: Mexico, Brazil, Thailand, even Poland.

These trends make it likely that someday, China will see some of the same anxiety over its manufacturing sector that's gripping the United States today. But for Americans, it also means undermining the case against China that politicians like to trot out so casually. When the jobs critique is only one-half or one-quarter as true as it is today, what's left is little more than a geeky and deeply technical complaint over trade deficits and currency manipulation -- issues voters understand in abstract terms, certainly, but not to the level of emotional detail that they currently get the jobs issue.

As we've seen in recent election cycles, and particularly this one, campaigns aren't necessarily bound by the limits of fact. U.S. politicians will still be free to inflate the Chinese threat for domestic audiences, and some voters will likely continue to buy the message indefinitely. Still, it's much easier to make China a target when its manufacturing sector hasn't been shrinking for 11 straight months.

When American conventional wisdom moves on to talking about how Latin America and southeast Asia are taking all the good old American jobs, expect the United States' relationship with China to get (a little) less fraught.

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Brian Fung is the technology writer at National Journal. He was previously an associate editor at The Atlantic and has written for Foreign Policy and The Washington Post.

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