Opinion

Navigating the U.S.-China Divorce: How Businesses Can Avoid Picking Sides

China watchers and market analysts alike were optimistic that the completion of the “Phase 1” trade deal between the United States and China would result in a truce after more than a year of open hostility between the two governments. Around the world, observers waited with nervous anticipation as the two superpowers duked it out in round after round of tit-for-tat skirmishes, all the while holding the market hostage. When the contours of the “Phase 1” deal were finally announced, many experts breathed a big sigh of relief, as the agreement provided both governments with ample ammunition to claim victory and gradually de-escalate the situation. 

Unfortunately, such solace appears to have been short lived as bilateral tensions have again reached a boiling point, leaving many companies looking for a quick release valve. The U.S. government, on the other hand, appears intent on ratcheting up pressure on Chinese telecommunications behemoth Huawei, as evidenced by an unsealed U.S. Department of Justice indictment alleging racketeering, as well conspiracy to launder money and obstruct justice. These new accusations were in addition to earlier charges accusing Huawei of financial fraud and sanctions violations. Such escalatory steps have occurred in the backdrop of a worldwide bout over the future of 5G, with the U.S. government leading the charge in raising legitimate concerns about plans by other countries to provide Huawei with access to sensitive networks. What’s more, U.S. companies across the spectrum are waking up to the risk posed by Chinese economic espionage, a threat which historically plagued only a small number of sensitive industries.

The ongoing “war of ideas” was also front-and-center during the recent Munich Security Conference, where U.S. and Chinese representatives pulled no punches as they attempted to win over skeptical attendees, even going so far as to aggressively denigrate one another’s intentions on the world stage. At best, such conferences can serve as a showcase for lively and healthy debate. At worst, they leave participants pondering a future in which there might not be any middle ground between the two superpowers on international security policy, let alone trade, manufacturing or finance.  

Recent events in Asia have further exacerbated the U.S. business community’s relative unease while also increasing market uncertainty. Civil unrest in Hong Kong, ongoing doubts surrounding the Chinese government’s ability to effectively respond to the COVID-19 crisis, and burgeoning concerns about the overall health of the Chinese economy have left many executives scratching their heads about how to best navigate the coming storm while also building durable supply chains, expanding customer networks and protecting the all-important bottom line. Thus, the $700 billion question becomes — is my company ready for when the balloon goes up, as it inevitably will?

As we watch the “conscious decoupling” of these two economic powerhouses, business executives would be wise to reject false notions that they too must align themselves with one side over another, let alone be forced to gamble their company’s fate in a risky game of foreign policy roulette. Successful, durable companies have always understood that opportunities exist in voids; the China challenge is no different. The key to rising above the uncertainty is to first recognize that all roads lead through both Washington and Beijing. The second is to reject the binary notion that all companies must side with one country at the expense of the other, the possible exception being companies that operate in the national security space.

What will ultimately separate successful companies from the rest of the pack is the development of comprehensive, flexible China strategies which include much-needed supply chain diversification and redundancy; premeditated wargaming and effective crisis management response; the establishment of executive-level positions to steward cross-enterprise strategy; and the leveraging of outside experts who can help make sense of the U.S.-China landscape and identify new opportunities on the horizon. Such strategies will likely require constant vigilance and may, at times, even feel overwhelming and reactive, but the road ahead is almost certainly going to get bumpy and this trip is far from over. 

In the meantime, do your organizations a favor —  take a deep breath, buckle up and begin the process of strategizing now. That is, before you find yourself at the center of the next geopolitical storm.

 

Craig Singleton is a national security expert and former diplomat who served under the Bush, Obama and Trump administrations. He currently serves as a senior advisor for Anno.ai, an innovative artificial intelligence start-up based in Washington, D.C.

Morning Consult welcomes op-ed submissions on policy, politics and business strategy in our coverage areas. Updated submission guidelines can be found here.

Do NOT follow this link or you will be banned from the site!