How China made it

  • Themes: America, China, Trade

The story of how the United States and China became so economically intertwined that they cannot break apart is at the heart of one of the most pressing issues in international politics.

Shipping Containers at the Los Angeles Harbor.
Shipping Containers in Los Angeles harbour. Credit: LHB Photo / Alamy Stock Photo

Made in China: When US-China Interests Converged to Transform Global Trade, Elizabeth O’Brien Ingleson, Harvard University Press, £29.95

Trade is all about numbers and two stand out from beginning to end in this account of how America and China got so close over five decades that they cannot tear themselves apart.

The first is in the title of Carl Crow’s book 400 Million Customers, published in 1937, a Shanghai adman’s dream of finding the biggest market on the planet in China. The second is the figure that counts now: 800 million workers, the labour force that led China to overtake the United States in 2010 to be the world’s top manufacturer.

A great deal of today’s tension and conflict can be explained by how these numbers turned the global economy inside out. It is summed up by the author, Elizabeth O’Brien Ingleson, an assistant professor of international history at the London School of Economics:

‘Throughout the 1970s, American capitalists and Chinese pragmatists worked together to reconfigure the China market from one of 400 million customers to one of 800 million workers.’

Instead of selling things to China, multinational corporations would make things at low cost in China to sell to other people. So began the greatest export boom in history.

The book is far from a collection of humdrum statistics, being rich in anecdotes and personality sketches of the pioneers of Sino-American trade, few of whom recognised that the militant realism of their Chinese counterparts was matched by a supremely optimistic detachment from reality on their own side.

Take the investment banker Charles Abrams, who told the New York Times  in 1974 of an early trip to Asia when the People’s Republic was still closed to people like him. He said: ‘I remember standing there in Hong Kong and saying to myself, “What lies beyond that great wall?”’ The Great Wall, in fact, stands roughly 1,500 miles north of Hong Kong.

Chinese officials traded on mystique to persuade the Americans that deals which made no immediate commercial sense represented an investment in the future by creating goodwill and trust; qualities which they never made the mistake of indulging in themselves. Between April 1971, when President Richard Nixon lifted the US trade embargo on China, and his meeting with Mao Zedong in February 1972, the author writes: ‘as part of a deliberate strategy, China did not purchase a single item from the United States’. It was an early example of linkage between trade and politics which remains a constant.

None the less, the author convincingly shows that for both sides the move to engagement delivered rewards. Eventually, firms like Apple, Walmart, Boeing and Nike did well out of China, while Chinese firms now list on Wall Street and American teens hoover up Chinese clothes and are glued to addictive apps.

It was so successful for China that the isolated Maoist nation of the 1970s grew into ‘a consumer powerhouse’ by the early 21st century and ‘the very nature of manufacturing and trade had been transformed’.

The arrival of a huge Chinese workforce on the world market shook up commerce and suppressed inflation in the rich countries by keeping wages and prices constrained, leading to a rise in asset prices and stock markets.

There was a cost. Ingleson argues that corporations helped Chinese leaders to lift most of their population out of poverty at the expense of, first, minimum-wage textile workers in the United States, and then ordinary people in a swathe of shuttered factories, dead industries and ghost towns, where the American Dream turned into deaths of despair.

Everyone lives with the consequences, the next US president, whoever that is, will have to manage them and the rest of the world will have to step carefully around the two giants.

To be clear, the author does not blame China for the loss of manufacturing jobs in the United States after the 1970s. Instead, she writes, they ‘were the result of changes within US capitalism enabled by policies in Washington’.

New manufacturing technologies, the transfer of labour-intensive industries overseas, the ‘hypermobility of capital’, the invention of ‘value chain management’ and a proliferation of consulting firms (who could argue with that?) created a new vocabulary of deindustrialisation and globalisation; in short, the US economy shifted from factories to finance.

The book records the forgotten resistance by American organised labour to a surge of Chinese imports. Its earliest opponents were trade unionists fighting for underpaid women in the garment industries, while ironclad anti-Communists such as George Meany, head of the mighty AFL-CIO union, denounced China as ‘a dictator nation which denies freedom to its people’, words which might echo around Congress today. Like all battles lost, its protagonists are written out of the story, but their legacy is inescapable in American politics; indeed, it may decide the next presidential election.

These are familiar debates to which Made in China makes a spirited contribution, but she brings fresh insight by highlighting ‘a deeply held’ political continuity that ‘persistently framed trade and manufacturing in terms of the nation state’. In other words, business may have made it all happen, but officials in Beijing and Washington set the terms and dictated the policies, from tariffs to regulations, which made every move strategic.

The fascinating thing is how it all started so small. Made in China tells the story of Shanghai-born Veronica Yhap, a Manhattan architect who set up a firm called Dragon Lady Traders to bring silk and cotton Maoist fashion to the aisles of Bloomingdales; as the writer points out, a commodity like clothing made Chinese people human and their culture real, even if many Manhattanites and college students thought they were just making a right-on statement by wearing the clothes.

Yhap was one of the first American business people to go to the Canton Fair, an export show that was China’s window on the outside world during the Maoist era. There was symbolism in the fact that its brand was the old western name for the trading port of Guangzhou, a locus of commerce between east and west since the Tang dynasty (618-907) and a marketplace for opium and mistrust in the colonial period.

Nobody in Chinese politics is permitted to forget the past, so every step of the way, from the US Trade Act of 1974 to eventual Chinese accession to the World Trade Organisation in 2001, was subject to ideological scrutiny in Beijing as well as lobbying in Washington. While China was determined and consistent, American opposition to trade liberalisation was incoherent, ill-organised and prone to unintended consequences.

The winners of the Trade Act, which was meant to curb imports, were corporations, according to the book. ‘The biggest blow dealt by the Trade Act was… to American manufacturing workers’, the author writes, while ‘the long term changes ushered in by the Trade Act went on to assist China’s convergence with global capitalism’.

America is now reaping the fruits of this long-neglected legislation and the decades of policies that flowed from it. One who did not forget was President Donald Trump, who invoked its provisions to issue executive orders limiting trade with China in a move applauded by his base – the drafters had assumed that any occupant of the White House would be a liberal internationalist.

Trump’s strategist, Steve Bannon, fed his belief that China had cheated, stolen and deceived its way to economic might. And although it is unlikely that the author of this book and Mr Bannon would see eye-to-eye on anything, Ingleson’s chapter on ‘The Limits of the China Market’ includes one priceless quotation from an American veteran of those early years when China was remote, enigmatic and alluring:

‘No matter how many times I’ve been there, for some reason I get into a mood after I cross the bridge (from Hong Kong), you know, that they’ve accorded me some great honour by allowing me to negotiate with them, to go to their country and so forth and then everything falls into place and I yield too quickly and I don’t negotiate as hard as I do in other places and I forgive more easily when they’re late in shipment and they ask you to extend the credit.’

In the springtime of 2024, when China’s supreme leader Xi Jinping has just summoned the top executives from American business to an audience with him that is meant to reassure them that all will be set fair despite his xenophobia, his ideological commitment to state control, and his Stalinist political instincts, it is worth taking the time to read the case studies laid out in this book. Far more is at stake than silk wear for Bloomingdales.


Michael Sheridan